---

Exhibit 99.3



|CONSOLIDATED FINANCIAL STATEMENTS
|---------------------------------
|                                 
|For the years ended              
|December 31, 2014 and 2013       

---

INDEPENDENT AUDITORS REPORT

To the Shareholders of Timmins Gold Corp.,

We have audited the accompanying consolidated financial
statements of Timmins Gold Corp., which comprise the consolidated statements of
financial position as at December 31, 2014 and December 31, 2013, and the
consolidated statements of earnings and total comprehensive income,consolidated statements of changes in equity and consolidated statements of
cash flows for the years then ended, and a summary of significant accounting
policies and other explanatory information.

Management's Responsibility for the Consolidated Financial
Statements

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

Auditor's Responsibility

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

An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditor's judgment, including
the assessment of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity's
preparation and fair presentation of the consolidated financial statements in
order to design audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
entity's internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made
by management, as well as evaluating the overall presentation of the
consolidated financial statements.

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

Opinion

In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of Timmins Gold Corp.
as at December 31, 2014 and December 31, 2013, and its financial performance and
its cash flows for the years then ended in accordance with International
Financial Reporting Standards as issued by the International Accounting
Standards Board.



|Chartered Accountants
|---------------------
|March 9, 2015        
|Vancouver, Canada    

---

|TIMMINS GOLD CORP.                                                                       
|-----------------------------------------------------------------------------------------
|CONSOLIDATED STATEMENTS OF EARNINGS AND TOTAL COMPREHENSIVE
      INCOME                 
|For the years ended December 31, 2014 and 2013                                           
|(In thousands of
      United States dollars, except share numbers and per share amounts)

Note
    
    
    2014
    
    
    2013Metal revenues
    
    21
    
    $
    154,068
    
    $
    160,593Cost of sales (including
      depreciation and depletion)
    
    6a)
    
    
    116,090
    
    
    101,920Earnings from mine
      operations
    
    
    
    
    37,978
    
    
    58,673Impairment of non-current
      unprocessed ore stockpile
    
    8
    
    
    -
    
    
    6,340Write-off of exploration and evaluation
      properties
    
    9
    
    
    1,808
    
    
    -Corporate and administrative
      expenses
    
    6b)
    
    
    14,003
    
    
    11,192Earnings from
      operations
    
    
    
    
    22,167
    
    
    41,141Other (expense) income, net
    
    
    
    
    (131
    )
    
    57Finance expense
    
    6c)
    
    
    (1,894
    )
    
    (1,707
    )Foreign exchange (loss) gain
    
    
    
    
    (183
    )
    
    747Earnings before income taxes
    
    
    
    
    19,959
    
    
    40,238Income taxesCurrent tax expense
    
    14
    
    
    10,152
    
    
    3,099Deferred tax expense
    
    14
    
    
    620
    
    
    21,79610,772
    
    
    24,895Earnings and total comprehensive income for the
      year
    
    
    
    $
    9,187
    
    $
    15,343Weighted average shares outstanding:Basic
    
    15
    
    
    161,297,692
    
    
    144,120,095Diluted
    
    15
    
    
    162,005,161
    
    
    146,140,439Earnings per share:Basic
    
    15
    
    $
    0.06
    
    $
    0.11Diluted
    
    15
    
    $
    0.06
    
    $
    0.11


The accompanying notes are an integral part of these
consolidated financial statements.

---

|TIMMINS GOLD CORP.                            
|----------------------------------------------
|CONSOLIDATED STATEMENTS OF CASH FLOWS         
|For the years ended December 31, 2014 and 2013
|(In thousands of
      United States dollars) 

Note
    
    
    2014
    
    
    2013OPERATING
      ACTIVITIESEarnings before income taxes
    
    
    
    **$**
    19,959
    
    $
    40,238Items not affecting
      cash:Depletion and
      depreciation
    
    6a)
    
    
    18,565
    
    
    15,471Finance expense
    
    6c)
    
    
    1,894
    
    
    1,707Share-based
      payments
    
    13b)
    
    
    1,411
    
    
    784Impairment of non-current unprocessed ore stockpile
    
    8
    
    
    -
    
    
    6,340Write-off of
      exploration and evaluation properties
    
    9
    
    
    1,808
    
    
    -Unrealized foreign exchange gain
    
    
    
    
    (2,008
    )
    
    (946
    )41,629
    
    
    63,594Changes in non-cash
      working capital items:Trade and other
      receivables
    
    
    
    
    (4,768
    )
    
    (4,246
    )Inventories
    
    
    
    
    (2,877
    )
    
    (10,171
    )Advances and
      prepaid expenses
    
    
    
    
    263
    
    
    1,995Trade payables and accrued liabilities
    
    
    
    
    (1,193
    )
    
    1,241Cash flows provided by operating activities
    
    
    
    
    33,054
    
    
    52,413INVESTING ACTIVITIESExpenditures on
      mineral properties, plant and equipment, exploration and evaluation
    
    
    
    
    (36,293
    )
    
    (52,572
    )Acquisition of exploration and evaluation property
    
    5
    
    
    (10,820
    )
    
    -Cash flows used in investing activities
    
    
    
    
    (47,113
    )
    
    (52,572
    )FINANCING
      ACTIVITIESInterest paid
    
    6c)
    
    
    (1,319
    )
    
    (1,398
    )Repayment of principal
      on loan facility
    
    12
    
    
    (4,515
    )
    
    -Proceeds from equity financing, net of
      transaction costs
    
    13a)
    
    
    24,184
    
    
    -Issuance of shares on exercise of share options
    
    13a)
    
    
    423
    
    
    165Cash flows provided by (used in) financing activities
    
    
    
    
    18,773
    
    
    (1,233
    )Effects of exchange rate changes on
      the balance of cash held in foreign currencies
    
    
    
    
    (538
    )
    
    (20
    )Increase (decrease) in cash and cash equivalents
    
    
    
    
    4,176
    
    
    (1,412
    )Cash and cash equivalents, beginning of year
    
    
    
    
    22,776
    
    
    24,188Cash and cash equivalents, end of year
    
    
    
    **$**
    26,952
    
    $
    22,776


Supplemental disclosure with respect to cash flows(note
16)

The accompanying notes are an integral part of these
consolidated financial statements.

---

|TIMMINS GOLD CORP.                           
|---------------------------------------------
|CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
|(In thousands of
      United States dollars)

|                                                 |  |          |  |   | December 31, |  |   | December 31, | 
|------------------------------------------------ |  | -------- |  | - | ------------ |  | - | ------------ | 
|                                                 |  | Note     |  |   | 2014         |  |   | 2013         | 
|                                                 |  |          |  |   |              |  |   |              | 
|ASSETS                                           |  |          |  |   |              |  |   |              | 
|Current                                          |  |          |  |   |              |  |   |              | 
|Cash and cash
      equivalents                  |  |          |  | $ | 26,952       |  | $ | 22,776       | 
|Trade and other receivables                      |  | 7        |  |   | 15,423       |  |   | 14,678       | 
|Inventories                                      |  | 8        |  |   | 46,693       |  |   | 43,103       | 
|Advances and prepaid expenses                    |  |          |  |   | 728          |  |   | 991          | 
|Total current assets                             |  |          |  |   | 89,796       |  |   | 81,548       | 
|                                                 |  |          |  |   |              |  |   |              | 
|Mineral properties, plant and
      equipment,   |  |          |  |   |              |  |   |              | 
|exploration and evaluation                       |  | 9        |  |   | 215,973      |  |   | 180,443      | 
|Non-current unprocessed ore stockpile            |  | 8        |  |   | 6,178        |  |   | 6,523        | 
|Total assets                                     |  |          |  | $ | 311,947      |  | $ | 268,514      | 
|                                                 |  |          |  |   |              |  |   |              | 
|LIABILITIES                                      |  |          |  |   |              |  |   |              | 
|Current                                          |  |          |  |   |              |  |   |              | 
|Trade payables and accrued
      liabilities     |  | 10       |  | $ | 25,520       |  | $ | 28,869       | 
|Loan facility                                    |  | 12, 22a) |  |   | 11,070       |  |   | 16,438       | 
|Current portion of equipment financing           |  | 9        |  |   | 1,134        |  |   | 1,134        | 
|Total current liabilities                        |  |          |  |   | 37,724       |  |   | 46,441       | 
|                                                 |  |          |  |   |              |  |   |              | 
|Deferred tax liabilities                         |  | 14d)     |  |   | 51,996       |  |   | 51,376       | 
|Long-term equipment financing                    |  | 9        |  |   | 945          |  |   | 2,080        | 
|Provision for site
      reclamation and closure |  | 11       |  |   | 1,865        |  |   | 3,168        | 
|Provision for contingent payment                 |  | 5        |  |   | 4,535        |  |   | -            | 
|Other provisions                                 |  |          |  |   | 1,105        |  |   | 1,097        | 
|Total liabilities                                |  |          |  |   | 98,170       |  |   | 104,162      | 
|                                                 |  |          |  |   |              |  |   |              | 
|EQUITY                                           |  |          |  |   |              |  |   |              | 
|Issued capital                                   |  | 13       |  |   | 128,735      |  |   | 89,653       | 
|Share-based payment reserve                      |  |          |  |   | 14,398       |  |   | 13,242       | 
|Retained earnings                                |  |          |  |   | 70,644       |  |   | 61,457       | 
|Total equity                                     |  |          |  |   | 213,777      |  |   | 164,352      | 
|Total liabilities and equity                     |  |          |  | $ | 311,947      |  | $ | 268,514      | 

Commitments and contingencies(note 20) Events
after the reporting period (note 22)

Approved by the Directors

|Bruce Bragagnolo | Director |  | Paula Rogers | Director
|------------------ | -------- |  | -------------- | --------

The accompanying notes are an integral part of these
consolidated financial statements.

---

|TIMMINS GOLD CORP.                                                 
|-------------------------------------------------------------------
|CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY                       
|(In thousands of
      United States dollars, except share numbers)

Share-Number of
    
    
    
    
    
    basedcommon
    
    
    Issued
    
    
    payment
    
    
    Retained
    
    
    Totalshares
    
    
    capital
    
    
    reserve
    
    
    earnings
    
    
    equityBalance at January 1, 2014
    
    Note
    
    
    144,159,045
    
    $
    89,653
    
    $
    13,242
    
    $
    61,457
    
    $
    164,352Earnings and total comprehensive income
      for the year
    
    
    
    
    -
    
    
    -
    
    
    -
    
    
    9,187
    
    
    9,187Share-based payments
    
    13
    
    
    -
    
    
    -
    
    
    1,411
    
    
    -
    
    
    1,411Shares issued on exercise of share
      options
    
    13
    
    
    433,334
    
    
    423
    
    
    -
    
    
    -
    
    
    423Reclassification of grant
      date fair value on exercise of share options
    
    
    
    
    -
    
    
    255
    
    
    (255
    )
    
    -
    
    
    -Shares issued for financing costs
    
    12, 13
    
    
    300,000
    
    
    407
    
    
    -
    
    
    -
    
    
    407Shares issued for cash
      equity financing
    
    13
    
    
    18,920,000
    
    
    24,184
    
    
    -
    
    
    -
    
    
    24,184Shares issued for asset acquisition
    
    5, 13
    
    
    16,065,000
    
    
    13,813
    
    
    -
    
    
    -
    
    
    13,813Balance at December 31, 2014
    
    
    
    
    179,877,379
    
    $
    128,735
    
    $
    14,398
    
    $
    70,644
    
    $
    213,777Balance at January 1, 2013
    
    
    
    
    144,084,045
    
    $
    89,419
    
    $
    12,527
    
    $
    46,114
    
    $
    148,060Earnings and total
      comprehensive income for the year
    
    
    
    
    -
    
    
    -
    
    
    -
    
    
    15,343
    
    
    15,343Share-based payments
    
    13
    
    
    -
    
    
    -
    
    
    784
    
    
    -
    
    
    784Shares issued on exercise of
      share options
    
    13
    
    
    75,000
    
    
    165
    
    
    -
    
    
    -
    
    
    165Reclassification of grant date fair value on exercise of share
      options
    
    
    
    
    -
    
    
    69
    
    
    (69
    )
    
    -
    
    
    -Balance at December 31, 2013
    
    
    
    
    144,159,045
    
    $
    89,653
    
    $
    13,242
    
    $
    61,457
    
    $
    164,352


The accompanying notes are an integral part of these
consolidated financial statements.

---

|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|1. | NATURE OF OPERATIONS
|-- | --------------------

Timmins Gold Corp. (the Company) was
incorporated on March 17, 2005 under the laws of the Province of British
Columbia, Canada. The Company is in the business of acquiring, exploring,
developing and operating mineral resource properties in Mexico, through its
wholly-owned subsidiaries, Timmins Goldcorp Mexico, S.A. de C.V. and
Molimentales del Noroeste, S.A. de C.V. (MdN) (collectively the
subsidiaries). MdN owns the San Francisco Mine which was placed into commercial
production on April 1, 2010. The Company is listed for trading on the Toronto
Stock Exchange under the symbol TMM and the New York Stock Exchange MKT under
the symbol TGD. The registered office of the Company is located at Suite 1900 -
570 Granville Street, Vancouver, British Columbia, Canada, V6C 3P1.

|2. | BASIS OF PREPARATION
|-- | --------------------

|a) | Statement of compliance                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | These consolidated financial statements (consolidated
      financial statements) have been prepared in accordance with International
      Financial Reporting Standards as issued by the International Accounting
      Standards Board (IFRS).                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | These consolidated financial statements were approved by
      the Board of Directors and authorized for issue on March 9,
2015.                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|b) | Basis of measurement                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | These consolidated financial statements have been
      prepared using the historical cost basis specified by IFRS for each type
      of asset, liability, income and expense as set out in the accounting
      policies below, except for certain financial assets and liabilities which
      are measured at fair value. In addition, these consolidated financial
      statements have been prepared using the accrual basis of
  accounting.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|c) | Functional currency and presentation
    currency                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | These consolidated financial statements are presented in
      thousands of United States (US) dollars, except as otherwise noted,
      which is the functional currency of the Company and each of the Companys
      subsidiaries. References to C$ are to Canadian dollars, which are also
      stated in thousands.                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|d) | Judgements                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | The critical judgements that the Companys management has
      made in the application of the accounting policies presented in note 3
      that have the most significant effect on the amounts recognized in these
      consolidated financial statements are as
follows:                                                                                                                                                                       

| | i.  | Functional currency                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     | The functional currency for each of the Companys
      subsidiaries is the currency of the primary economic environment in which
      the respective entity operates; the Company has determined the functional
      currency of each entity to be the US dollar. Such determination involves
      certain judgements to identify the primary economic environment. The
      Company reconsiders the functional currency of its subsidiaries if there
      is a change in events and/or conditions which determine the primary
      economic environment.             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ii. | Business combination versus asset
    acquisition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     | The Company considered the applicability of IFRS 3 -
      Business Combinations(IFRS 3) with respect to the acquisition of
      Caballo Blanco (note 5). IFRS 3 outlines a business as having a system
      where inputs enter a process to produce outputs. The Company has
      determined that Caballo Blanco does not meet the criteria for a business
      based on the indicators outlined by IFRS. As such, the Company has
      determined that the acquisition of Caballo Blanco not be treated as a
      business combination but as an asset acquisition.

6

---

|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|2. | BASIS OF PREPARATION
(Continued)
|-- | --------------------------------

| | iii. | Economic recoverability and probability of future
      economic benefits of exploration, evaluation and development
    costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |      | Management has determined that exploratory drilling,
      evaluation, development and related costs incurred which were capitalized
      as exploration and evaluation (note 9) have future economic benefits and
      are economically recoverable. Management uses several criteria in its
      assessments of economic recoverability and probability of future economic
      benefit including geologic and metallurgic information, history of
      conversion of mineral deposits to proven and probable reserves, scoping
      and feasibility studies, accessible facilities, existing permits and life
      of mine plans.

|e) | Significant estimates and assumptions                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | The preparation of the Companys consolidated financial
      statements in conformity with IFRS requires management to make estimates
      based on assumptions about future events that affect the reported amounts
      of assets and liabilities and disclosures of contingent assets and
      liabilities at the date of the financial statements and the reported
      amounts of revenues and expenses during the reporting period.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | The estimates and associated assumptions are based on
      historical experience and various other factors that are believed to be
      reasonable under the circumstances, the results of which form the basis of
      making the judgements about carrying values of assets and liabilities that
      are not readily apparent from other sources. Actual results could differ
      from those estimates.                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | The estimates and underlying assumptions are reviewed on
      an ongoing basis. Revisions to accounting estimates are recognized
      prospectively in the period in which the estimate is revised.                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | Areas that require significant estimates and assumptions
      as the basis for determining the stated amounts include, but are not
      limited to, the following:                                                                                                                                                                                                                                                                          

| | i.  | Impairments (note 9)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     | The Company assesses its mineral properties, plant and
      equipment assets and exploration and evaluation properties annually to
      determine whether any indication of impairment exists. Where an indicator
      of impairment exists, a formal estimate of the recoverable amount is made,
      which is considered to be the higher of the fair value less costs of
      disposal and value in use.                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     | In determining the recoverable amounts of the Companys
      mineral properties and plant and equipment assets, management makes
      estimates of the discounted future cash flows expected to be derived from
      the Companys mining properties, costs of disposal the mining properties
      and the appropriate discount rate. Reductions in metal price forecasts,
      increases in estimated future costs of production, increases in estimated
      future capital expenditures, reductions in the amount of recoverable
      reserves, resources, and exploration potential, and/or adverse current
      economics can result in an impairment of the carrying amounts of the
      Companys property, plant and equipment and/or mining interests.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ii. | Mineral reserves                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     | Proven and probable mineral reserves are the economically
      mineable parts of the Companys measured and indicated mineral resources
      demonstrated by at least a preliminary feasibility study.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     | The Company estimates its proven and probable reserves
      and measured and indicated and inferred mineral resources based on
      information compiled by appropriately qualified persons.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     | The information relating to the geological data on the
      size, depth and shape of the ore body requires complex geological
      judgements to interpret the data.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

7

---

|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|2. | BASIS OF PREPARATION
(Continued)
|-- | --------------------------------

| |      | The estimation of future cash flows related to proven and
      probable reserves is based upon factors such as estimates of foreign
      exchange rates, commodity prices, future capital requirements and
      production costs along with geological assumptions and judgements made in
      estimating the recovery rate, size and grade of the ore body.                                                                                                                                                                                                                                                                                                                                                                       
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |      | Changes in the proven and probable reserves or measured
      and indicated and inferred mineral resources estimates may impact the
      carrying value of mineral properties, exploration and evaluation
      properties and plant and equipment (note 9), site reclamation and closure
      provisions (note 11), recognition of deferred tax amounts (note 14) and
      depreciation and depletion (note 9).                                                                                                                                                                                                                                                                                                                    
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | iii. | Depreciation and depletion (note 9)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |      | Plants and other facilities used directly in mining
      activities are depreciated using the units-of-production (UOP) method
      over a period not to exceed the estimated life of the ore body based on
      recoverable ounces to be mined from proven and probable reserves. Mobile
      and other equipment are depreciated, net of residual value, on a
      straight-line basis, over the useful life of the equipment to the extent
      that the useful life does not exceed the related estimated life of the
      mine based on proven and probable reserves.                                                                                                                                                    
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |      | The calculation of the UOP rate, and therefore the annual
      depreciation and depletion expense could be materially affected by changes
      in the underlying estimates. Changes in estimates can be the result of
      actual future production differing from current forecasts of future
      production, expansion of mineral reserves through exploration activities,
      differences between estimated and actual recovery rates and costs of
      mining and differences in gold price used in the estimation of mineral
      reserves.                                                                                                                                                                              
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |      | Significant judgement is involved in the estimation of
      useful life and residual values for the computation of depreciation and
      depletion and no assurance can be given that actual useful lives and
      residual values will not differ significantly from current
    assumptions.                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | iv.  | Deferred stripping costs (note 9)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |      | In determining whether stripping costs incurred during
      the production phase of a mining property relate to reserves and resources
      that will be mined in a future period and therefore should be capitalized,
      the Company makes estimates of the stripping activity over the life of the
      mining property (life of mine strip ratio). Changes in estimated life of
      mine strip ratios can result in a change to the future capitalization of
      stripping costs incurred.                                                                                                                                                                                                                              
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | v.   | Inventories (note 8)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |      | Expenditures incurred, and depreciation and depletion of
      assets used in mining and processing activities are deferred and
      accumulated as the cost of ore in stockpiles, ore in process and finished
      metal inventory. These deferred amounts are carried at the lower of
      average cost or net realizable value (NRV) and are subject to
      significant measurement uncertainty.                                                                                                                                                                                                                                                                                                                             
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |      | Write-downs of ore in stockpiles, ore in process, and
      finished metal inventory resulting from NRV impairments are reported as a
      component of current period costs. The primary factors that influence the
      need to record write-downs include prevailing and long-term metal prices
      and prevailing costs for production inputs such as labour, fuel and
      energy, materials and supplies, as well as realized ore grades and actual
      production levels.                                                                                                                                                                                                                                                
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |      | Costs are attributed to the ore in process based on
      current mining costs, including applicable depreciation and depletion
      relating to mining operations incurred up to the point of placing the ore
      on the leach pad. Costs are removed from ore in process based on the
      average cost per estimated recoverable ounce of gold on the leach pad as
      the gold is recovered. Estimates of recoverable gold on the leach pads are
      calculated from the quantities of ore placed on the pads, the grade of ore
      placed on the leach pads and an estimated percentage of recovery. Timing
      and ultimate recovery of gold contained on leach pads can vary
      significantly from the estimates.

8

---

|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|2. | BASIS OF PREPARATION
(Continued)
|-- | --------------------------------

| |      | The quantities of recoverable gold placed on the leach
      pads are reconciled to the quantities of gold actually recovered
      (metallurgical balancing), by comparing the grades of ore placed on the
      leach pads to actual ounces recovered. The nature of the leaching process
      inherently limits the ability to precisely monitor inventory levels. As a
      result, the metallurgical balancing process is constantly monitored and
      the engineering estimates are refined based on actual results over time.
      The ultimate recovery of gold from a leach pad will not be known until the
      leaching process is completed.                                                                                                                                                                                                                                                                                                                                                                      
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |      | The allocation of costs to ore in stockpiles, ore in
      process, and finished metal inventory and the determination of NRV involve
      the use of estimates. There is a high degree of judgement in estimating
      future costs, future production level, gold prices, and the ultimate
      estimated recovery for ore in process. There can be no assurance that
      actual results will not differ significantly from estimates used in the
      determination of the carrying value of inventories.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | vi.  | Provision for site reclamation and closure (note
      11)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |      | Site reclamation and closure provisions are recognized in
      the period in which they arise and are stated as the present value of
      estimated future costs. These estimates require extensive judgement about
      the nature, cost and timing of the work to be completed, and may change
      with future changes to costs, environmental laws and regulations and
      remediation practices. In view of uncertainties concerning environmental
      rehabilitation, the ultimate costs could be materially different from the
      amounts estimated.                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |      | It is possible that the Companys estimate of the site
      reclamation and closure liability could change as a result of change in
      regulations, the extent of environmental remediation required, the means
      and technology of reclamation activities or cost estimates. Any such
      changes could materially impact the estimated provision for site
      reclamation and closure. Changes in estimates are accounted for
      prospectively from the period the estimate is revised.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | vii. | Deferred taxes (note 14)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |      | The Companys provision for income taxes is estimated
      based on the expected annual effective tax rate. The current and deferred
      components of income taxes are estimated based on forecasted movements in
      temporary differences. Changes to the expected annual effective tax rate
      and differences between the actual and expected effective tax rate and
      between actual and forecasted movements in temporary differences will
      result in adjustments to the Companys provision for income taxes in the
      period changes are made and/or differences are identified.                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |      | In assessing the probability of realizing income tax
      assets recognized, management makes estimates related to expectations of
      future taxable income, applicable tax planning opportunities, expected
      timing of reversals of existing temporary differences and the likelihood
      that tax positions taken will be sustained upon examination by applicable
      tax authorities. In making its assessments, management gives additional
      weight to positive and negative evidence that can be objectively verified.
      Estimates of future taxable income are based on forecasted cash flows from
      operations and the application of existing tax laws in each jurisdiction.
      Forecasted cash flows from operations are based on life of mine
      projections internally developed and reviewed by management. Weight is
      attached to tax planning opportunities that are within the Companys
      control, and are feasible and implementable without significant
      obstacles.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |      | The likelihood that tax positions taken will be sustained
      upon examination by applicable tax authorities is assessed based on
      individual facts and circumstances of the relevant tax position evaluated
      in light of all available evidence.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |      | Where applicable tax laws and regulations are either
      unclear or subject to ongoing varying interpretations, it is reasonably
      possible that changes in these estimates can occur that materially affect
      the amounts of income tax assets recognized. At the end of each reporting
      period, the Company reassesses unrecognized income tax
  assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

9

---

|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|2. | BASIS OF PREPARATION
(Continued)
|-- | --------------------------------

| | viii. | Share-based payments (note 13)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |       | Share-based payments are measured at fair value. Options
      are measured using the Black-Scholes option pricing model based on
      estimated fair values of all share-based awards at the date of grant and
      are expensed to earnings or loss from operations over each awards vesting
      period. The Black-Scholes option pricing model utilizes subjective
      assumptions such as expected price volatility and expected life of the
      option. Changes in these input assumptions can significantly affect the
      fair value estimate.
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ix.   | Contingencies (note 20)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |       | Due to the nature of the Companys operations, various
      legal and tax matters can arise from time to time. In the event that
      managements estimate of the future resolution of these matters changes,
      the Company will recognize the effects of the changes in its consolidated
      financial statements for the period in which such changes
  occur.                                                                                                                                                                                       

|3. | SIGNIFICANT ACCOUNTING
POLICIES
|-- | -------------------------------

The significant accounting policies
used in the preparation of these consolidated financial statements are as
follows:

|a) | Basis of consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | These consolidated financial statements include the
      accounts of the Company and its wholly-owned subsidiaries disclosed in
      note 1. All inter-company balances, transactions, revenues and expenses
      have been eliminated on consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | Control exists where the parent entity is exposed, or has
      rights, to variable returns from its involvement with the investee and has
      the ability to affect those returns through its power over the investee.
      Subsidiaries are included in the consolidated financial statements from
      the date control commences until the date control ceases.                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|b) | Foreign currency translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | In preparing the financial statements of each individual
      group entity, transactions in currencies other than the entity's
      functional currency (foreign currencies) are translated at the rates of
      exchange prevailing at the dates of the transactions. At the end of each
      reporting period, monetary assets and liabilities denominated in foreign
      currencies are translated at the exchange rates prevailing at that date.
      Exchange gains and losses are recognized on a net basis in earnings or
      loss from operations for the period.                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|c) | Cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | Cash includes cash and cash equivalent balances held with
      financial institutions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|d) | Revenue recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | Metal revenues are earned from the sale of refined metal
      (primarily gold and silver by-product) and are recognized when significant
      risks and rewards of ownership have passed to the buyer, it is probable
      that economic benefits associated with the transaction will flow to the
      Company, the sale price can be measured reliably, the Company has no
      significant continuing involvement, and the costs incurred or to be
      incurred in respect of the transaction can be measured reliably. Metal
      revenues are subject to adjustment upon final settlement based upon metal
      prices, weights and assays. These adjustments are recorded within metal
      revenues.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|e) | Inventories                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | The Company predominantly produces gold and silver
      by-product. Inventories consist of unprocessed ore stockpile, ore in
      process, finished metal inventory (doré), and operations supplies. Doré
      represents a bar containing predominantly gold by value which must be
      refined into its saleable metals.                                                                                                                                                                                                                                                                                                                                                                                      

10

---

|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|3. | SIGNIFICANT ACCOUNTING POLICIES
  (Continued)
|-- | ---------------------------------------------

| | These inventories are valued at the lower of cost and NRV
      after consideration of additional processing, refining and transportation
      costs. NRV represents the estimated future sales price of the product
      based on prevailing and long-term metals prices or as determined in
      long-term sales contracts, less the estimated costs to complete production
      and bring the product to saleable form.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Write-downs of inventory are recognized in earnings or loss
      from operations as incurred. The Company reverses write- downs in the
      event that there is a subsequent increase in NRV.                                                                                                                                                                                                                               

| | i.   | Unprocessed ore stockpile                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |      | This represents ore that has been mined and is available
      for further processing. The NRV of the unprocessed ore stockpile is
      measured by estimating the number of tonnes added and removed from the
      stockpile, the number of contained ounces (based on assay data) and the
      estimated metallurgical recovery rates (based on the expected processing
      method). Stockpile ore tonnages are verified by periodic
surveys.                                                                                                                                          
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |      | Costs are allocated to the stockpile based on the current
      mining cost per tonne incurred up to the point of stockpiling the ore,
      including applicable overhead and depletion and depreciation relating to
      mining operations, and are removed at the average cost per ounce. As the
      unprocessed ore stockpile is not expected to be processed further within
      one year of the date of these consolidated financial statements, the net
      carrying amount related to the stockpile has been classified as
      non-current unprocessed ore stockpile (note 8).
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ii.  | Ore in process                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |      | The recovery of gold and silver from the ore is achieved
      through heap leaching processes. Costs are added to ore on leach pads
      based on current mining and processing costs, including applicable
      overhead, depletion and depreciation relating to mining operations. Costs
      are removed from ore on leach pads as ounces are recovered, based on the
      average cost per ounce of recoverable gold in ore in process
    inventory.                                                                                                                                
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | iii. | Finished metal inventory                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |      | Finished metal inventory consists of doré bars containing
      gold and silver.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | iv.  | Supplies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |      | Supplies include consumables used in operations such as
      fuel, grinding material, chemicals, and spare parts. NRV is estimated as
      replacement cost.                                                                                                                                                                                                                                                                                                                                                                                                                                
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |      | Major spare parts and standby equipment are included in
      plant and equipment when they are expected to be used during more than one
      period and if they can only be used in connection with an item of plant
      and equipment.                                                                                                                                                                                                                                                                                                                                                   

|f) | Mineral properties, plant and equipment, exploration
      and evaluation
|-- | -------------------------------------------------------------------------

| | i. | Mineral property and development costs                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | Mineral property development costs, including
      reclassified mineral property acquisition costs and capitalized
      exploration and evaluation costs, are stated at cost less accumulated
      depreciation and accumulated impairment losses. Costs associated with the
      commissioning of new assets, net of incidental revenues, are capitalized
      as mineral property costs in the period before they are operating in the
      manner intended by management.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    | The Company capitalizes the cost of acquiring,
      maintaining, exploring, and developing mineral properties until such time
      as the properties are placed into production, abandoned, sold or
      considered to be impaired in value.                                                                                                                                                                                                                                   

11

---

|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|3. | SIGNIFICANT ACCOUNTING POLICIES
  (Continued)
|-- | ---------------------------------------------

| |     | Costs of producing properties are amortized using the UOP
      method based on estimated proven and probable reserves and the costs of
      abandoned properties are written off in the period in which that decision
      is made by management.                                                                                                                                                                                                                                                                                                                                                                      
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | The Company capitalizes the costs of developing mineral
      properties that are currently in production until such time that
      management can conclude the existence of additional proven and probable
      reserves resulting from the development activities. Upon determination of
      the additional proven and probable ounces, the development costs are
      amortized using the UOP method based on the total proven and probable
      reserves (previous remaining reserves plus new reserves).                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | Proceeds received on the sale of interests in mineral
      properties are credited to the carrying value of the mineral properties,
      with any excess included in earnings or loss as incurred. Write-offs due
      to impairment in value are charged to earnings or loss as
  incurred.                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | In open pit mining operations, it is necessary to remove
      overburden and other waste in order to access the ore body. Stripping
      costs incurred prior to commercial production are capitalized and deferred
      as part of the cost of constructing the mine.                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | Mining costs associated with stripping activities during
      the production phase of a mine are variable production costs that are
      included in the costs of the inventory during the period that the
      stripping costs are incurred, unless the stripping activity can be shown
      to represent future benefits to the mineral property, in which case
      stripping costs are capitalized.                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | Future benefits to the mineral property are demonstrated
      when stripping activity results in either immediate usable ore to produce
      finished gold doré bar inventory or improved access to sources of gold
      reserves that will be produced in future periods that would otherwise not
      have been accessible. Stripping activity occurs on separately identifiable
      components of the open pit and the amount capitalized is calculated by
      multiplying the tonnes removed for stripping purposes from each
      identifiable component during the period by the mining cost per
    tonne.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | The Company includes stripping costs in its production
      costs using a strip ratio based on tonnes of material removed compared to
      the estimated strip ratio per each separately identifiable component.
      Periods where the actual strip ratio for the identifiable component
      exceeds the average life of mine strip ratio for that component result in
      deferral of the excess stripping costs as an asset recorded within mineral
      properties (note 9).                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ii. | Plant and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | Plant and equipment is measured at cost less accumulated
      depreciation and impairment losses. Cost includes the purchase price, any
      costs directly attributable to bringing plant and equipment to the
      location and condition necessary for it to be capable of operating in the
      manner intended by management and the estimated site reclamation and
      closure costs associated with removing the asset, and, where applicable,
      borrowing costs.                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | Upon sale or abandonment of any plant and equipment, the
      cost and related accumulated depreciation and impairment losses are
      written off and any gains or losses thereon are recognized in earnings or
      loss for the period. When the parts of an item of plant and equipment have
      different useful lives, they are accounted for as separate items (major
      components) of plant and equipment.                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | The cost of replacing or overhauling a component of an
      item of plant and equipment is recognized in the carrying amount of the
      item if it is probable that the future economic benefits embodied within
      the component will flow to the Company and its cost can be measured
      reliably. The carrying amount of the replaced component is derecognized.
      Maintenance and repairs of a routine nature are charged to earnings or
      loss as incurred.                                                                                                                                         

12

---

|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|3. | SIGNIFICANT ACCOUNTING POLICIES
  (Continued)
|-- | ---------------------------------------------

| | iii. | Exploration and evaluation costs                                                                                                                                                                                                                                                                                                                                                                                          
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                           
| |      | Acquisition costs for exploration and evaluation stage
      properties are capitalized. Exploration and evaluation expenditures
      incurred on a mineral property are capitalized where management determines
      there is sufficient evidence that the expenditure will result in a future
      economic benefit to the Company. All other exploration and evaluation
      expenditures are expensed as incurred.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                           
| |      | Exploration and evaluation expenditures comprise costs
      that are directly attributable to:                                                                                                                                                                                                                                                                                                                           

| |  |  | researching and analyzing existing
  exploration data;                                                                               
| |  | - | -------------------------------------------------------------------------------------------------------------------------------------
| |  |  | conducting geological studies, exploratory
      drilling and sampling;                                                              
| |  |  | examining and testing extraction and treatment
      methods; and                                                                    
| |  |  | activities in relation to evaluating the
      technical feasibility and commercial viability of extracting a mineral
      resource.

| |  | Subsequent to completion of a positive economic
      analysis on a mineral property, capitalized acquisition costs and
      exploration and evaluation expenditures are reclassified to mineral
      properties. The Company is in the process of exploring and developing many
      of its exploration and evaluation properties and has not yet determined
      the amount of reserves available.                                                                     
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | Management reviews the carrying value of
      mineral properties at each reporting date and will recognize impairment in
      value based upon current exploration results, the prospect of further work
      being carried out by the Company, the assessment of future probability of
      profitable revenues from the property, or from the sale of the property.
      Amounts shown for properties represent costs incurred net of write-offs
      and recoveries.

| | iv. | Depletion and depreciation                                                                                                                                                                     
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                
| |     | Mineral property costs, including deferred stripping
      costs, are depreciated when commercial production begins using the UOP
      method based on estimated proven and probable reserves.
| |     |                                                                                                                                                                                                
| |     | Plant and equipment, including major components, are
      depreciated using the following depreciation
methods:                                                                               

| | Computer equipment             | 30% straight line method
| | ------------------------------ | ------------------------
| | Leasehold improvements         | 20% straight line method
| | Office furniture and equipment | 10% straight line method
| | Vehicles                       | 25% straight line method
| | Mine equipment and buildings   | UOP method              
| | Plant and equipment            | UOP method              

| |  | Depreciation commences on the date the asset is
      available for use.
| |  | ------------------------------------------------------------------------

|g) | Provisions                                                                                                                                                                                                                                                               
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                          
|   | A provision is recognized if, as a result of a past
      event, the Company has a present legal or constructive obligation that can
      be estimated reliably and it is probable that an outflow of economic
      benefits will be required to settle the obligation.
|   |                                                                                                                                                                                                                                                                          
|   | Constructive obligations are obligations that derive from
      the Companys actions where:                                                                                                                                                                             

| |  | by an established pattern of past practice,
      published policies or a sufficiently specific current statement, the
      Company has indicated to other parties that it will accept certain
      responsibilities; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | as a result, the Company has created a valid
      expectation on the part of those other parties that it will discharge
      those responsibilities.                                                                     

13

---

|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|3. | SIGNIFICANT ACCOUNTING POLICIES
  (Continued)
|-- | ---------------------------------------------

Provisions are reviewed at the end of each
      reporting period and adjusted to reflect managements current best
      estimate of the expenditure required to settle the present obligation at
      the end of the reporting period. If it is no longer probable that an
      outflow of resources embodying economic benefits will be required to
      settle the obligation, the provision is reversed. Provisions are reduced
      by actual expenditures for which the provision was originally recognized.
      Provisions are determined by discounting the expected future cash flows at
      a pre-tax rate that reflects the current market assessments of the time
      value of money and the risks specific to the liability. The accretion of
      the discount is charged to earnings or loss for the period.


| | i.  | Provision for site reclamation and
  closure                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | The Companys mining and exploration activities are
      subject to various laws and regulations governing the protection of the
      environment. The Company records the fair value of a provision for site
      reclamation and closure as a liability in the period in which it incurred
      a legal or constructive obligation associated with the reclamation of the
      mine site and the retirement of tangible long-lived assets that result
      from the acquisition, construction, development, and/or normal use of the
      assets.                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | The obligation is measured initially at present value
      based on estimated future cash flows derived using internal information
      and third party reports. The estimated cost is capitalized and included in
      the carrying value of the related mineral properties and is depreciated
      using either the straight-line method or UOP method, as
  appropriate.                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | The provision is initially discounted using a current
      market-based pre-tax discount rate and subsequently increased for the
      unwinding of the discount. The unwinding of the discount is charged to
      earnings or loss for the period.                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | At each reporting date, the Company reviews its provision
      for site reclamation and closure to reflect the current best estimate. The
      provision for site reclamation and closure is adjusted for changes in
      factors such as the amount or timing of the expected underlying cash
      flows, or the market-based pre-tax discount rate, with the offsetting
      amount recorded to the site reclamation and closure asset included in
      mineral properties which arises at the time of establishing the provision.
      The site reclamation and closure asset is depreciated on the same basis as
      the related asset.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ii. | Provision for contingent payment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | The Companys acquisition of Caballo Blanco includes a
      contingent payment of $5,000, if in the next five years, Caballo Blanco
      receives approval for its environmental permit or the Company undergoes a
      change of control. The Company estimated the permitting requirements will
      be met within two years.                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | The obligation is measured initially at present value
      based on estimated future cash flows discounted at a market based pre-tax
      discount rate. The estimated cost is capitalized and included in the
      carrying value of the related exploration and evaluation mineral
      properties.                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | The provision is initially and subsequently increased for
      the unwinding of the discount over managements estimated period of two
      years. The unwinding of the discount is charged to earnings or loss for
      the period.                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | It is possible that the Companys estimate of the
      contingent payment liability could change as a result of change in the
      timing that mining permits are acquired or if the Company undergoes a
      change of control within the next five years or earlier. Any such changes
      could materially impact the estimated provision for contingent payment.
      Changes in estimates are accounted for prospectively from the period the
      estimate is revised.                                                                                                                                                                  

14

---

|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|3. | SIGNIFICANT ACCOUNTING POLICIES
  (Continued)
|-- | ---------------------------------------------

|h) | Share-based payments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Certain employees and directors of the Company receive a
      portion of their remuneration in the form of share options. The fair value
      of the share options, determined at the date of the grant, is charged to
      earnings or loss, with an offsetting credit to share-based payment
      reserve, over the vesting period. If and when the share options are
      exercised, the applicable original amounts of share-based payment reserve
      are transferred to issued capital.                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The fair value of a share-based payment is determined at
      the date of the grant. The estimated fair value of share options is
      measured using the Black-Scholes option pricing model. The Black-Scholes
      option pricing model requires the input of subjective assumptions,
      including the expected term of the option and share price volatility. The
      expected term of options granted is determined based on historical data on
      the average hold period before exercise, expiry or cancellation. Expected
      volatility is estimated with reference to the historical volatility of the
      share price of the Company.                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | These estimates involve inherent uncertainties and the
      application of managements judgement. The costs of share-based payments
      are recognized over the vesting period of the option. The total amount
      recognized as an expense is adjusted to reflect the number of options
      expected to vest at each reporting date. At each reporting date prior to
      vesting, the cumulative compensation expense representing the extent to
      which the vesting period has passed and managements best estimate of the
      share options that are ultimately expected to vest is computed. The
      movement in cumulative expense is recognized in earnings or loss with a
      corresponding entry to share-based payment reserve.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Share-based payments to non-employees are measured at the
      fair value of the goods or services received or the fair value of the
      equity instruments issued if it is determined that the fair value of the
      goods or services cannot be reliably measured, and are recorded at the
      date the goods or services are received.                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | No expense is recognized for share options that do not
      ultimately vest. Charges for share options that are forfeited before
      vesting are reversed from share-based payment reserve and credited to
      earnings or loss. For those share options that expire unexercised after
      vesting, the recorded value remains in share-based payment
  reserve.                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|i) | Issued capital                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Common shares are classified as issued capital. Costs
      directly attributable to the issue of common shares are recognized as a
      deduction from issued capital, net of any tax effects.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|j) | Financial assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Financial assets, other than derivatives, are classified
      as held to maturity, available-for-sale, loans and receivables or fair
      value through profit or loss (FVTPL).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Financial assets classified as available-for-sale are
      measured initially at fair value plus transaction costs and subsequently
      at fair value with unrealized gains and losses recognized in other
      comprehensive income except for financial assets that are considered to be
      impaired, in which case the impairment loss is charged to earnings or
      loss. The Company has not classified any assets as available-for-sale for
      any period presented.                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Financial assets classified as loans and receivables are
      measured initially at fair value plus transaction costs and subsequently
      at amortized cost using the effective interest method. The effective
      interest method is a method of calculating the amortized cost of a
      financial asset and allocating the interest expense over the relevant
      period. The effective interest rate is the rate that exactly discounts
      estimated future cash payments through the expected life of the financial
      asset, or, where appropriate, a shorter period. The Companys cash and
      cash equivalents, and trade and other receivables are classified as loans
      and receivables.                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Financial assets classified as FVTPL are measured on
      initial recognition and subsequently at fair value with unrealized gains
      and losses recognized in earnings or loss. Transaction costs are expensed
      for assets classified as FVTPL. The Company has not classified any assets
      as FVTPL for any period presented.                                                                                                                                                                                                                                                                                                                                                                                                                 

15

---

|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|3. | SIGNIFICANT ACCOUNTING POLICIES
  (Continued)
|-- | ---------------------------------------------

|k) | Financial liabilities                                                                                                                                                                                                                                                                                                                            
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                  
|   | Financial liabilities, which are trade payables and
      accrued liabilities, vendor loan, equipment financing, and loan facility
      are initially recognized at fair value less directly attributable
      transaction costs. Subsequently, financial liabilities are measured at
      amortized cost using the effective interest method.
|   |                                                                                                                                                                                                                                                                                                                                                  
|   | Financial liabilities classified as FVTPL include
      financial liabilities held for trading and financial liabilities
      designated upon recognition as FVTPL. Fair value changes on these
      liabilities are recognized in earnings or loss.                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                  
|l) | Impairment                                                                                                                                                                                                                                                                                                                                       

i.
    Impairment of financial assetsAt each reporting date, the Company assesses whether
      there is any objective evidence that a financial asset or a group of
      financial assets, other than financial assets classified as FVTPL, is
      impaired. A financial asset or a group of financial assets is impaired if
      there is objective evidence that the estimated future cash flows of the
      financial asset or the group of financial assets have been negatively
      impacted, and the impact can be reliably measured.Objective evidence of impairment could include the
      following:


| |  | significant financial difficulty of the issuer
      or counterparty;                            
| | - | -------------------------------------------------------------------------------------------------
| |  | default or delinquency in interest or principal
      payments; or                               
| |  | it has become probable that the borrower will
      enter bankruptcy or financial reorganization.

| |  | An impairment loss in respect of a financial
      asset measured at amortized cost is calculated as the difference between
      its carrying amount and the present value of the estimated future cash
      flows discounted at the assets original effective interest rate. Losses
      are recognized in earnings or loss and reflected in an allowance account
      against trade and other receivables. Interest on the impaired asset
      continues to be recognized through the unwinding of the discount.                                                                                                                                                                                                                                     
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | With the exception of available-for-sale equity
      instruments, if, in a subsequent period, the amount of the impairment loss
      decreases, the previously recognized impairment loss is reversed through
      earnings or loss to the extent that the carrying amount of the impaired
      financial asset at the date the impairment is reversed does not exceed
      what the amortized cost would have been had the impairment not been
      recognized. In respect to available-for-sale equity instruments,
      impairment losses previously recognized in earnings or loss are not
      reversed through earnings or loss. Any increase in fair value subsequent
      to an impairment loss is recognized in other comprehensive income.

| | ii. | Impairment of non-financial assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | At each reporting date, the Company reviews the carrying
      amounts of its non-financial assets to determine whether there are any
      indications of impairment. If any such indication exists such as decreases
      in metal prices, an increase in operating costs, a decrease in mineable
      reserves or a change in foreign exchange rate, the recoverable amount of
      the asset is estimated in order to determine the extent of the impairment,
      if any. In determining the recoverable amount, the Company also considers
      the net carrying amount of the asset, the ongoing costs required to
      maintain and operate the asset, and the use, value and condition of the
      asset.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | Where the asset does not generate cash inflows that are
      independent with other assets, the Company estimates the recoverable
      amount of the cash-generating unit (CGU) to which the asset belongs. A
      CGU is the smallest identifiable group of assets that generates cash
      inflows that are largely independent of the cash inflows from other assets
      or group of assets. This generally results in the Company evaluating its
      non-financial assets on a property by property
basis.                                                                                                                                                                                                 

16

---

|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|3. | SIGNIFICANT ACCOUNTING POLICIES
  (Continued)
|-- | ---------------------------------------------

| |  | The recoverable amount is determined as the
      higher of fair value less costs of disposal and the assets value in use.
      Fair value is determined with reference to discounted estimated future
      cash flow analysis or to recent transactions involving dispositions of
      similar properties. In assessing value in use, the estimated future cash
      flows are discounted to their present value.                                                                          
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | The pre-tax discount rate applied to the
      estimated future cash flows measured on a value in use basis reflects
      current market assessments of the time value of money and the risks
      specific to the asset for which the future cash flow estimates have not
      been adjusted.                                                                                                                                                                                                
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | If the carrying amount of an asset or CGU
      exceeds its recoverable amount, the carrying amount of the asset or CGU is
      reduced to its recoverable amount. An impairment loss is recognized as a
      charge to earnings or loss. Non-financial assets that have been impaired
      are tested for possible reversal of the impairment whenever events or
      changes in circumstance indicate that the impairment may have reversed.                                               
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | Where an impairment subsequently reverses, the
      carrying amount of the asset or CGU is increased to the revised estimate
      of its recoverable amount, but only so that the increased carrying amount
      does not exceed the carrying amount that would have been determined (net
      of depletion and depreciation) had no impairment loss been recognized for
      the asset or CGU in prior periods. A reversal of impairment is recognized
      as a gain in earnings or loss.

|m) | Taxes
|-- | -----

| | i.  | Current tax expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | Current tax is the expected tax payable or receivable on
      the taxable earnings or loss for the period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | Current tax for each taxable entity in the Company is
      based on the local taxable income at the local statutory tax rate enacted
      or substantively enacted at the reporting date, and includes adjustments
      to tax payable or recoverable in respect of previous periods.                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ii. | Deferred tax expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | Deferred tax is accounted for using the liability method,
      providing for the tax effect of temporary differences between the carrying
      amount of assets and liabilities for financial reporting purposes and
      their respective tax bases.                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | Deferred tax liabilities are recognized for all taxable
      temporary differences except where the deferred tax liability arises from
      the initial recognition of goodwill, or the initial recognition of an
      asset or liability in a transaction that is not a business combination
      and, at the time of the transaction, affects neither the accounting
      earnings nor taxable earnings or loss.                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | Deferred tax assets are recognized for all deductible
      temporary differences, carry forwards of unused tax losses and tax
      credits, to the extent that it is probable that taxable earnings will be
      available against which the deductible temporary differences, and the
      carry forward of unused tax losses can be utilized, except where the
      deferred tax asset related to the deductible temporary difference arises
      from the initial recognition of an asset or liability in a transaction
      that is not a business combination and, at the time of the transaction,
      affects neither the accounting earnings nor taxable earnings or
    loss.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | The carrying amounts of deferred tax assets are reviewed
      at each reporting date and are adjusted to the extent that it is no longer
      probable that sufficient taxable earnings will be available to allow all
      or part of the asset to be utilized. To the extent that an asset not
      previously recognized fulfills the criteria for recognition, a deferred
      tax asset is recorded.                                                                                                                                                                                                                                                                                

17

---

|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|3. | SIGNIFICANT ACCOUNTING POLICIES
  (Continued)
|-- | ---------------------------------------------

| |      | Deferred tax is measured on an undiscounted basis using
      the tax rates that are expected to apply in the period when the liability
      is settled or the asset is realized, based on tax rates and tax laws
      enacted or substantially enacted at the reporting date. Current and
      deferred tax relating to items recognized directly in equity is recognized
      in equity and not in earnings or loss.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                           
| | iii. | Mining taxes and royalties                                                                                                                                                                                                                                                                                                                                                                                                
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                           
| |      | Mining taxes and certain royalties are treated and
      disclosed as current and deferred taxes if they have the characteristics
      of an income tax. This is considered to be the case when they are imposed
      under government authority and the amount payable is calculated by
      reference to a form of net income after adjustment for items comprising
      temporary differences.                     

|n) | Earnings from mine operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Earnings from mine operations is an additional generally
      accepted accounting principle (GAAP) measure calculated by subtracting
      the cost of sales, which includes production costs and depletion and
      depreciation, from the Companys metal revenues.                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|o) | Earnings from operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Earnings from operations is an additional GAAP measure
      calculated by subtracting other operational expenses from the Companys
      earnings from mine operations. Other operational expenses are those that
      are not directly attributable to the production of inventory and include
      corporate and administrative expenses and any impairment of assets
      incurred during the period.                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|p) | Earnings per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Basic earnings per share (EPS) is calculated by
      dividing the earnings and total comprehensive income of the Company by the
      basic weighted average number of common shares outstanding during the
      period. For purposes of calculating diluted EPS, the proceeds from the
      potential exercise of dilutive share options and share purchase warrants
      with exercise prices that are below the average market price of the
      underlying shares are assumed to be used in purchasing the Companys
      common shares at their average market price for the period.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Share options and share purchase warrants are included in
      the calculation of diluted EPS only to the extent that the market price of
      the common shares exceeds the exercise price of the share options or share
      purchase warrants except where such conversion would be
    anti-dilutive.                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|q) | Borrowing costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Borrowing costs directly attributable to the acquisition,
      construction or production of qualifying assets, which are assets that
      necessarily take a substantial period of time to get ready for their
      intended use or sale, are added to the cost of those assets, until such
      time as the assets are substantially ready for their intended use or sale.
      Qualifying assets include the cost of developing mineral properties and
      constructing new facilities.                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Borrowing costs are capitalized at the rate of interest
      applicable to the specific borrowings financing the assets under
      construction, or, where financed through general borrowings, at a
      capitalization rate representing the weighted average interest rate on
      such borrowings. Investment income earned on the temporary investment of
      specific borrowings pending their expenditure on qualifying assets is
      deducted from the borrowing costs eligible for capitalization.                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | All other borrowing costs are recognized in earnings or
      loss in the period in which they are incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

18

---

|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|3. | SIGNIFICANT ACCOUNTING POLICIES
  (Continued)
|-- | ---------------------------------------------

|r) | Operating segments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The Company has determined that it operates through one
      reportable operating segment, being the acquisition, exploration, and
      development of mineral properties located in two geographical areas,
      Canada and Mexico. Reporting is prepared on a geographic and consolidated
      basis as determined by the requirements of the Chief Executive Officer as
      the chief operating decision maker for the Company. The Company does not
      treat the production of gold and silver by-product as separate operating
      segments as they are the output of the same production process and only
      become separately identifiable as finished goods and are not reported
      separately from a management perspective.

|4. | RECENT ACCOUNTING
PRONOUNCEMENTS
|-- | --------------------------------

Certain pronouncements were issued by
the IASB or the IFRS Interpretations Committee (IFRIC) that are mandatory for
accounting periods after December 31, 2013. Pronouncements that are not
applicable to the Company have been excluded from this note.

| | a) | IFRIC 21 - Levies- the Interpretation is
      effective for annual periods beginning on or after January 1, 2014. This
      Standard provides clarification on the accounting for a liability to pay a
      levy. The Company adopted this standard as of January 1, 2014. The
      adoption of IFRIC 21 did not materially impact the consolidated financial
      statements.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following pronouncements have been
issued but are not yet effective:

| | a) | IFRS 9 - Financial Instruments- The standard is
      effective for annual reporting periods beginning January 1, 2018 for
      public entities. The Company is assessing the impact of this
    Standard.                                                                                                                                                                                               
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                           
| | b) | IFRS 15 - Revenue from Contracts with Customers-
      The standard is effective for annual reporting periods beginning after
      December 15, 2016 for public entities with early adoption permitted.
      Entities have the option of using either a full retrospective or a
      modified retrospective approach to adopt the guidance. The Company is
      assessing the impact of this Standard.

|5. | ACQUISITION OF CABALLO
BLANCO
|-- | -----------------------------

On December 23, 2014 (the closing
date), the Company acquired 100% of the Caballo Blanco
Gold Project (Caballo Blanco) from subsidiaries of Goldgroup Mining Inc. (Goldgroup).
Caballo Blanco is a gold development project located in the state of Veracruz,
Mexico, 65 kilometers northwest of the state capital, Veracruz, with an
estimated Measured and Indicated Resource of 575,000 ounce of gold (28.9 million
tonnes grading 0.62 grams per tonne of gold) and an Inferred Resource of 419,000
ounces of gold (24.0 million tonnes grading 0.54 grams per tonne of gold) per
the preliminary economic assessment filed in April 2012.

Total consideration paid to the
subsidiaries of Goldgroup to acquire Caballo Blanco was $29,168, consisting of
$10,000 in cash and 16,065,000 common shares of the Company at a deemed price of
$0.86 per share and a contingent payment of $5,000 when Caballo Blanco receives
approval for its environmental permit or the Company undergoes a change of
control within the next five years. The contingent payment can be paid in cash or common
shares, at the option of the Company, and has been recognized at its fair value
of $4,535, which is based on when the Company estimates the permits will be
obtained. The Caballo Blanco project is subject to a total 2.0% NSR in favour of
third parties.

As of December 31, 2014, 6,426,000 of
the common shares were still being held in escrow awaiting the achievement of
agreed upon escrow release conditions. These administrative escrow release
conditions relate to the final governmental approval of the transfer of
concessions and mineral rights from the subsidiaries of Goldgroup to the
Company. The escrow release conditions are expected to be met within four months
of the closing date.

The acquisition has been accounted for
by the Company as a purchase of assets and assumption of liabilities. The
transaction did not qualify as a business combination under IFRS 3 - Business
Combinations, as significant inputs and processes that together constitute a
business do not currently exist.

19

---

|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|5. | ACQUISITION OF CABALLO BLANCO
  (Continued)
|-- | -------------------------------------------

Total consideration has been allocated
to the assets acquired and liabilities assumed based upon their relative fair
value at the date of acquisition. Total consideration of $29,168 was calculated
as follows:

Cash consideration
    $
    10,000Issuance of common shares
    
    13,813Transaction costs
    
    820Provision for contingent payment
    
    4,535Total consideration
    $
    29,168


The total consideration was allocated
to mineral properties as an exploration and evaluation asset.

|6. | EXPENSES
|-- | --------

|a) | Cost of sales:
|-- | --------------

Years ended
      December 31,2014
    
    
    2013Costs of contract mining
    $
    51,276
    
    $
    47,930Crushing and gold recovery costs
    
    41,303
    
    
    39,058Mine site administration
      costs
    
    6,039
    
    
    6,546Transport and refining
    
    347
    
    
    379Royalties (1)
    
    772
    
    
    -Change in inventories
    
    (2,212
    )
    
    (7,464
    )Production costs
    
    97,525
    
    
    86,449Depreciation and depletion
    
    18,565
    
    
    15,471Cost of sales (including depreciation and depletion)
    $
    116,090
    
    $
    101,920


| | (1) | Effective January 1, 2014, the new Mexican Extraordinary
      Mining Duty calculated as 0.5% of gross revenues is included as part of
      production costs.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

|b) | Corporate and administrative
  expenses:
|-- | ----------------------------------------

| |                                            |  |      |  |       | Years ended December 31, | 
| | ------------------------------------------ |  | ---- |  | ----- | ------------------------ | 
| |                                            |  | Note |  |       | 2014                     | 
| | Salaries                                   |  |      |  | **$** | 3,830                    | 
| | Consulting and professional
      fees (1) |  |      |  |       | 5,332                    | 
| | Share-based payments                       |  | 13b) |  |       | 1,411                    | 
| | Rent and office costs                      |  |      |  |       | 686                      | 
| | Administrative and other                   |  |      |  |       | 2,744                    | 
| | Corporate and administrative expenses      |  |      |  | **$** | 14,003                   | 

| | (1) | During the year ended December 31, 2014, the Company
      incurred $2,149 (December 31, 2013 - $nil) in costs relating to a proxy
      contest.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------

20

---

|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|6. | EXPENSES (Continued)
|-- | --------------------

|c) | Finance expense:
|-- | ----------------

Years ended
      December 31,2014
    
    
    2013Interest on loan facility and
      equipment financing
    $
    1,319
    
    $
    1,398Accretion of loan facility
    
    467
    
    
    263Accretion of provision for
      site reclamation and closureand
      other provisions
    
    108
    
    
    46Finance expense
    $
    1,894
    
    $
    1,707


|7. | TRADE AND OTHER
RECEIVABLES
|-- | ---------------------------

Years ended
      December 31,2014
    
    
    2013Trade receivable
    $
    533
    
    $
    1,228VAT receivable (1)
    
    13,760
    
    
    12,433Other receivables (2)
    
    1,130
    
    
    1,017$
    15,423
    
    $
    14,678


| | (1) | VAT receivable is value added tax payments made by the
      Company, which in Mexico and Canada are refundable. The Company elects to
      use VAT amounts owed to it to settle income tax instalments payable to the
      Mexican government. As a result, the Company currently pays no income tax
      cash instalments and receives reduced amounts of VAT cash refunds. At
      December 31, 2014, the VAT receivable includes $nil for the purpose of
      settling income taxes payable at year end (December 31, 2013 - $4,650).
      Subsequent to December 31, 2014, $4,007 of VAT was received by the
      Company.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (2) | Other receivables include an allowance of doubtful
      amounts of $129 (December 31, 2013 - $nil)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

|8. | INVENTORIES
|-- | -----------

| |                                             |   | Years ended
      December 31, |  
| | ------------------------------------------- | - | ------------------------------ | -
| |                                             |   | 2014                           |  
| | Ore in process                              | $ | 37,270                         |  
| | Finished metal inventory                    |   | -                              |  
| | Supplies                                    |   | 9,423                          |  
| | Non-current unprocessed ore stockpile (1)   |   | 6,178                          |  
| |                                             |   | 52,871                         |  
| | Less: non-current unprocessed ore stockpile |   | (6,178                         | )
| |                                             | $ | 46,693                         |  

| | (1) | During the year ended December 31, 2014, the Company
      recognized total impairment charges of $nil (year ended December 31, 2013
      - $6,340) in relation to the non-current unprocessed ore
  stockpile.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The costs of inventories recognized as
an expense for the year ended December 31, 2014 were $116,090 (year ended
December 31, 2013 - $101,920) and are included in cost of sales.

21

---

|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|9. | MINERAL PROPERTIES, PLANT AND EQUIPMENT, EXPLORATION
      AND EVALUATION
|-- | -------------------------------------------------------------------------

ExplorationMineral
    
    
    Plant and
    
    
    andNote
    
    
    properties(a)
    
    
    equipment
    
    
    evaluation(b)
    
    
    TotalCostAt January 1, 2014
    
    
    
    $
    137,006
    
    $
    84,348
    
    $
    4,985
    
    $
    226,339Expenditures(1)
    
    
    
    
    19,032
    
    
    5,984
    
    
    32,660
    
    
    57,676Change in reclamation obligation
    
    11
    
    
    (1,402
    )
    
    -
    
    
    -
    
    
    (1,402
    )At December 31, 2014
    
    
    
    
    154,636
    
    
    90,332
    
    
    37,645
    
    
    282,613Accumulated depreciation and
      depletionAt January 1, 2014
    
    
    
    
    27,136
    
    
    18,760
    
    
    -
    
    
    45,896Depreciation and depletion
    
    
    
    
    8,576
    
    
    10,360
    
    
    -
    
    
    18,936Write-off of exploration and evaluation
      properties(2)
    
    
    
    
    -
    
    
    -
    
    
    1,808
    
    
    1,808At December 31, 2014
    
    
    
    
    35,712
    
    
    29,120
    
    
    1,808
    
    
    66,640Carrying amount at December 31, 2014
    
    
    
    $
    118,924
    
    $
    61,212
    
    $
    35,837
    
    $
    215,973


ExplorationMineral
    
    
    Plant and
    
    
    andNote
    
    
    properties(a)
    
    
    equipment
    
    
    evaluation
    
    
    TotalCostAt January 1, 2013
    
    
    
    $
    108,117
    
    $
    52,744
    
    $
    3,673
    
    $
    164,534Expenditures (3)
    
    
    
    
    28,628
    
    
    31,604
    
    
    1,312
    
    
    61,544Change in reclamation obligation
    
    11
    
    
    261
    
    
    -
    
    
    -
    
    
    261At December 31, 2013
    
    
    
    
    137,006
    
    
    84,348
    
    
    4,985
    
    
    226,339Accumulated depreciation and depletionAt January 1, 2013
    
    
    
    
    16,648
    
    
    10,739
    
    
    -
    
    
    27,387Depreciation and depletion
    
    
    
    
    10,488
    
    
    8,021
    
    
    -
    
    
    18,509At December 31, 2013
    
    
    
    
    27,136
    
    
    18,760
    
    
    -
    
    
    45,896Carrying amount at December 31, 2013
    
    
    
    $
    109,870
    
    $
    65,588
    
    $
    4,985
    
    $
    180,443


| | (1) | On December 23, 2014, the Company closed an agreement to
      acquire the Caballo Blanco property located in the state of Veracruz,
      Mexico for a total consideration of $29,168. The total consideration was
      allocated to mineral properties as an exploration and evaluation asset
      (note 5).                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (2) | During the year ended December 31, 2014, the Company
      wrote-off certain exploration and evaluation properties in
      order to focus resources on the San Francisco Property as well as newly
      acquired assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (3) | During the third quarter of 2013, the Company entered
      into an agreement with an equipment supplier (the Supplier) to finance
      the remaining portion of an equipment purchase totalling $4,862 of which
      the Company had previously paid $1,459. The financing agreement carries an
      annual interest rate of 7.2% and the remaining balance of $3,403 is
      payable in 36 monthly instalments which include equal principal repayments
      of $95. Legal fees and other directly attributable transaction costs
      totalled $28. At December 31, 2014, the current and long-term portions of
      the equipment financing total $1,134 and $945, respectively (December 31,
      2013 - $1,134 and $2,080, respectively).

22

---

|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|9. | MINERAL PROPERTIES, PLANT AND EQUIPMENT, EXPLORATION
      AND EVALUATION (Continued)
|-- | -------------------------------------------------------------------------------------

|a) | Mineral properties
|-- | ------------------

December 31,
    
    
    December 31,2014
    
    
    2013Depletable mineral property
    $
    102,908
    
    $
    94,003Non-depletable mineral properties
    
    16,016
    
    
    15,867$
    118,924
    
    $
    109,870


| | i.  | San Francisco Property                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | The San Francisco Property is located in Santa Ana,
      Sonora, Mexico which is formed by several adjacent claims. Commercial
      production began April 1, 2010. The Company continues to conduct and incur
      some exploration and development costs which are being capitalized. At
      December 31, 2014, mineral properties includes $43,440 (December 31, 2014
      - $34,171) of unamortized deferred stripping costs.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ii. | La Chicharra Property                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | The La Chicharra Property is also located in Santa Ana,
      Sonora, Mexico adjacent to the San Francisco Property, and is considered
      part of the overall San Francisco Gold Property. The La Chicharra Property
      is under active exploration and development, but is not yet in commercial
      production and is therefore considered
non-depletable.                                                                   

|b) | Exploration and evaluation
|-- | --------------------------

The Company is holding and exploring a
number of mineral properties in Mexico which are included in exploration and
evaluation.

| | i.   | Caballo Blanco Gold Project                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |      | On December 23, 2014, the Company closed an agreement to
      acquire 100% of the Caballo Blanco Gold Project located in the state of
      Veracruz, Mexico, with an estimated Measured and Indicated Resource of
      575,000 ounce of gold (28.9 million tonnes grading 0.62 grams per tonne of
      gold) and an Inferred Resource of 419,000 ounces of gold (24.0 million
      tonnes grading 0.54 grams per tonne of gold) per the preliminary economic
      assessment filed in April 2012. The total consideration paid for the asset
      was $29,168 (note 5).                                                                                                                                                                                                                                                                                                                                                                          
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ii.  | El Picacho Project                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |      | On December 11, 2007, the Company entered into an
      exploration agreement with the option to acquire a 100% interest in the 11
      mining properties that comprise the El Picacho Project in Sonora, Mexico.
      The agreement, which was subsequently renegotiated, required the Company
      to make periodic payments totalling $300 up to October 2015. At December
      31, 2014, a cumulative total of $290 has been paid. The vendor will retain
      a 1.5% net smelter return interest, which is limited to $1,500. The vendor
      is obligated to sell or transfer to the Company their right to the royalty
      at any time, upon the Companys request, for which the Company will pay
      $500 for every half per cent (0.5%), to a maximum of $1,500. The Company
      has also previously staked an additional 6,500 hectares surrounding the
      claims and now controls over 7,200 hectares in the El Picacho area.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | iii. | Other properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |      | The Company has title to the Patricia, Norma and El Foco
      claims located in the state of Sonora, Mexico. During the year, the
      Company acquired the 1,380 hectare El Foco property. The Company has title
      to five wholly owned mining concessions, known as the TIM claims, located
      in the state of Zacatecas, Mexico; as well as the Cocula claims amounting
      to 534 hectares in the state of Jalisco, Mexico.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

23

---

|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|10. | TRADE PAYABLES AND ACCRUED
  LIABILITIES
|--- | ----------------------------------------

| |                      |   | December 31, |  |   | December 31, | 
| | -------------------- | - | ------------ |  | - | ------------ | 
| |                      |   | 2014         |  |   | 2013         | 
| | Trade payables       | $ | 17,520       |  | $ | 23,957       | 
| | Income taxes payable |   | 4,482        |  |   | 834          | 
| | Accrued liabilities  |   | 1,736        |  |   | 1,821        | 
| | Vendor loan          |   | 1,725        |  |   | 1,725        | 
| | Other                |   | 57           |  |   | 532          | 
| |                      | $ | 25,520       |  | $ | 28,869       | 

|11. | PROVISION FOR SITE RECLAMATION AND
  CLOSURE
|--- | --------------------------------------------

Balance at January 1, 2013
    $
    2,869Accretion of discounted cash flows
    
    38Change in estimated cash flows and assumptions
    
    261Balance at December 31, 2013
    $
    3,168Accretion of discounted cash
      flows
    
    99Change in estimated cash flows and assumptions
    
    (1,402
    )Balance at December 31, 2014
    $
    1,865


The provision for site reclamation and
closure consists of mine closure costs, reclamation and retirement obligations
for mine facilities and infrastructure.

During the year ended December 31,
2014, the Company completed its annual reassessment of the provision for site
reclamation and closure based on independent technical reports. As a result of
this reassessment, the provision was reduced by $1,402 (year ended December 31,
2013- increase in provision of $261).

The total undiscounted amount of
estimated cash flows required to settle the retirement obligations of the San
Francisco Property is $2,312 (December 31, 2013 - $4,540). The cash flows have
been inflated by the rate of 4.0% (December 31, 2013 - 4.0%) and discounted
using the pre-tax risk-free rate of 2.17% (December 31, 2013 - 3.0%) . The
provision for site reclamation and closure is not expected to be paid in the
near term and is intended to be funded from cash balances at the time of the
mine closure.

|12. | LOAN FACILITY
|--- | -------------

During December 2013, the Company
negotiated with Sprott Asset Management (the Lender) to extend the
pre-existing C$18,000 loan facility 12 months beyond the original expiry date of
December 31, 2013 in exchange for 300,000 common shares of the Company. The
shares were issued on January 24, 2014 and had a fair value of C$1.50 ($1.36)
per share at the date of issue.

The amended loan facility was repayable
in full on or before December 31, 2014 with a stated interest rate of 9.0% per
annum. On February 28, 2014, the Company repaid C$5,000 ($4,515) in principal of
the C$18,000 ($16,438) loan facility outstanding at December 31, 2013.

During December 2014, the Company
renegotiated with the Lender to extend the term of the current loan facility of
C$13,000 ($11,206) another 12 months to a maturity date of December 31, 2015.
The loan facility will continue to have an interest rate of 9% per annum. The
Company incurred transaction costs of $136, consisting of C$130 ($112) in
extension fees and $24 in legal fees. For the year ended December 31, 2014, the
effective interest rate of the debt agreement was 10.2% (December 31, 2013 -
8.9%) .

24

---

|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|12. | LOAN FACILITY (Continued)
|--- | -------------------------

Subsequent to December 31, 2014, the
loan facility was converted to US dollars (note 22).

Under the terms of the loan facility,
the Company has pledged all of its assets (including the assets of its
subsidiaries) in favour of the Lender as security over the loan facility. In
addition, the subsidiaries have each provided guarantees to the Lender for the
repayment of any amounts advanced to the Company under the terms of the loan
facility.

At December 31, 2014 and 2013, no
accrued interest on the loan facility was included in trade payables and accrued
liabilities.

|13. | EQUITY
|--- | ------

|a) | Authorized share
capital
|-- | ------------------------

| |  | Unlimited number of common shares without par
      value. These shares have voting rights and their holders are entitled to
      receive dividend payments; and                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Unlimited number of convertible preference
      shares without par value, with the same rights as the common shares on
      dissolution and similar events. These shares have no voting rights and are
      not entitled to dividend payments.

The Company had the following common
share transactions:

| |  | During the year, the Company issued 433,334
      common shares, for a value of $423, to share option holders who exercised
      their options (note 13b) (December 31, 2013 - 75,000 common shares, for a
      value of $165).
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | On January 24, 2014, the Company issued 300,000
      common shares as part of renegotiating the loan facility (note 12).                                                                                                        
| |  | On February 11, 2014, the Company closed a
      bought deal financing and issued 18,920,000 common shares for gross
      proceeds of C$28,380 ($25,741), with transaction costs of C$1,716
      ($1,557).                     
| |  | On December 23, 2014, the Company completed the
      acquisition of Caballo Blanco and issued 16,065,000 common shares with a
      value of C$16,065 ($13,813) (note 5).                                                       

At December 31, 2014, there were
179,877,379 issued and outstanding common shares (December 31, 2013 -
144,159,045). The Company does not currently pay dividends and entitlement will
only arise upon declaration.

|b) | Share options
|-- | -------------

The Company has an incentive share
option plan (the plan) in place under which it is authorized to grant share
options to executive officers, directors, employees and consultants. The plan
allows the Company to grant share options up to a maximum of 10.0% of the number
of issued shares of the Company.

Share options granted under the plan
will have a term not to exceed five years, have an exercise price not less than
the Discounted Market Price as defined by the TSX Corporate Finance Manual and
vest over periods up to two years.

25

---

|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|13. | EQUITY (Continued)
|--- | ------------------

Share option transactions and the
number of share options outstanding during the year ended December 31, 2014 and
2013 are summarized as follows:

| |                                        |  | Number of share |   |  | Weighted average    | 
| | -------------------------------------- |  | --------------- | - |  | ------------------- | 
| |                                        |  | options         |   |  | exercise price (C$) | 
| | Outstanding at January 1,
      2013   |  | 8,950,000       |   |  | 2.25                | 
| | Granted                                |  | 2,800,000       |   |  | 1.25                | 
| | Exercised                              |  | (75,000         | ) |  | 2.15                | 
| | Forfeited                              |  | (300,000        | ) |  | 2.74                | 
| | Outstanding at December 31,
      2013 |  | 11,375,000      |   |  | 1.99                | 
| | Granted                                |  | 3,300,000       |   |  | 1.44                | 
| | Exercised                              |  | (433,334        | ) |  | 1.08                | 
| | Forfeited                              |  | (1,341,666      | ) |  | 2.24                | 
| | Outstanding at December 31, 2014       |  | 12,900,000      |   |  | 1.85                | 
| | Exercisable at December 31, 2014       |  | 9,841,664       |   |  | 1.99                | 

Share options outstanding and
exercisable at December 31, 2014 are as follows:

Weighted
    
    
    WeightedWeighted
    average
    
    Weighted
    averageExercise
    Number of
    average
    remaining life
    Number of
    average
    remaining lifeprice range
    options
    exercise price
    of options
    options
    exercise price
    of options(C$)
    outstanding
    (C$)
    (years)
    exercisable
    (C$)
    (years)1.00 - 2.33
    7,175,000
    1.30
    3.61
    4,116,664
    1.22
    2.832.34 - 2.75
    5,725,000
    2.55
    1.75
    5,725,000
    2.55
    1.7512,900,000
    1.85
    2.79
    9,841,664
    1.99
    2.20


There were 433,334 share options
exercised during the year ended December 31, 2014 (year ended December 31, 2013
- 75,000). The weighted average share prices at the dates of exercise for the
433,334 share options exercised during the year ended December 31, 2014 were
C$1.08 (year ended December 31, 2013 - C$2.15) .

The fair value of share options
recognized as an expense during the year ended December 31, 2014 was $1,411
(year ended December 31, 2013 - $784). There were 3,300,000 share options
granted during the year ended December 31, 2014 (year ended December 31, 2013 -
2,800,000). During the years ended December 31, 2014 and 2013, the weighted
average grant date fair value per option of the share options granted was C$1.44
and C$1.25, respectively.

The following are the weighted average
assumptions used for the Black-Scholes option pricing model valuation of share
options granted during the years ended December 31, 2014 and 2013:

Years ended
      December 31,2014
    
    
    2013Risk-free interest rate
    
    1.3%
    
    
    1.5%Expected life of options
    
    4.1 years
    
    
    4.1 yearsAnnualized volatility
    
    62.3%
    
    
    63.0%Forfeiture rate
    
    2.2%
    
    
    2.2%Dividend rate
    
    0.0%
    
    
    0.0%


The risk-free rate of periods within
the expected life of the share option is based on the Canadian government bond
rate.

26

---

|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|13. | EQUITY (Continued)
|--- | ------------------

The expected life of share options
granted represents the period of time that share options granted are expected to
be outstanding. Expected volatilities are based on historical volatility of the
Companys shares listed on the TSX. The expected forfeiture is based on the
historical forfeiture rate of the Companys share options.

|14. | INCOME TAXES
|--- | ------------

For the year ended December 31, 2014,
the Company incurred $10,152 of current income tax expense (year ended December
31, 2013 - $3,099).

For the year ended December 31, 2014,
the Company incurred $620 of deferred income tax expense (year ended December
31, 2013 - $21,796). The amounts in both periods relate primarily to recognizing
the tax effects on changes in tax rates and in timing differences from mineral
property and equipment balances.

|a) | Rate changes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | During December 2013, the 2014 Mexico Tax Reform (the
      Tax Reform) was published in Mexicos official gazette with changes
      taking effect January 1, 2014. The Tax Reform eliminates the gradual tax
      rate reduction to 28% that was enacted in 2012. As a result, the tax rate
      for 2014 and thereafter will remain at 30%. The flat tax introduced in
      2009 which was levied at the rate of 17.5% on cash flows of Mexican
      corporations was also eliminated as part of the Tax Reform.                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The combined Canadian federal and provincial income tax
      rates increased from 25.75% for the year ended December 31, 2013 to 26.00%
      for the year ended December 31, 2014.                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|b) | Tax reforms effective January 1, 2014                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The Tax Reform includes the implementation of a 7.5%
      Special Mining Duty (SMD) and a 0.5% Extraordinary Mining Duty (EMD).
      The Company has taken the position that the SMD is an income tax under
      International Accounting Standard 12 - Income Taxes(IAS 12), as
      it is calculated based on a form of earnings before income taxes less
      certain specified costs. The EMD is a calculation based on gross revenues
      and is therefore not considered an income tax. Both the SMD and EMD are
      deductible for income tax purposes.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|c) | Rate reconciliation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Income tax expense differs from the amount that would
      result by applying the combined Canadian federal and provincial income tax
      rates to earnings before income taxes. Substantially all of the Companys
      taxable income for the year ended December 31, 2014 is generated in Mexico
      and is subject to Mexicos 30% tax rate (year ended December 31, 2013 -
      30%).                                                                                                                                                                            

27

---

|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|14. | INCOME TAXES (Continued)
|--- | ------------------------

The impact of being subject to this
higher tax rate, as well as other differences, is included in the following
reconciliation:

Years ended
      December 31,2014
    
    
    2013Earnings before income taxes
    $
    19,959
    
    $
    40,238Combined Canadian federal and provincial
      income tax rates
    
    26.00%
    
    
    25.75%Expected income tax expense
    
    5,189
    
    
    10,361Items that cause an increase (decrease):Effect of different tax rates in foreign jurisdiction
    
    1,137
    
    
    1,904Non-deductible
      expenses
    
    976
    
    
    1,575Foreign exchange
    
    1,420
    
    
    701Effect of SMD in
      Mexico
    
    (631
    )
    
    8,605Difference in future and current tax rates
    
    -
    
    
    1,108Change in
      unrecognized deferred income tax assets
    
    2,170
    
    
    826Other
    
    511
    
    
    (185
    )Income tax expense
    $
    10,772
    
    $
    24,895


As a result of the Tax Reform temporary
differences arose between the book basis of the Companys mining assets and
financial assets and liabilities and their tax basis. For the purposes of
calculating the SMD, the tax basis of mining assets and financial assets and
liabilities is $nil. As of December 31, 2013, the Company recognized a net
one-time non-cash charge of $8,605 related to the deferred tax liability impact
of the SMD. This deferred tax liability will be drawn down to $nil as a
reduction to deferred tax expense over the life of mine as the mine and its
related assets are depleted and depreciated.

|d) | Deferred tax assets and
  liabilities
|-- | -------------------------------------

The composition of the Company's net
deferred income tax liabilities at December 31, 2014 and 2013 are as follows:

December 31,
    
    
    December 31,2014
    
    
    2013Deferred income tax assets:Non-capital losses
    $
    3,060
    
    $
    1,595Monetary items and other
    
    2,907
    
    
    2645,967
    
    
    1,859Deferred income tax liabilities:Mineral
      properties book value in excess of tax value
    
    (54,131
    )
    
    (52,011
    )Other
    
    (3,832
    )
    
    (1,224
    )(57,963
    )
    
    (53,235
    )Deferred income tax liabilities, net
    $
    (51,996
    )
    $
    (51,376
    )


28

---

|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|14. | INCOME TAXES (Continued)
|--- | ------------------------

The Company's unrecognized deductible
temporary difference at December 31, 2014 and 2013 are as follows:

| |                                         |   | December 31, |  |   | December 31, | 
| | --------------------------------------- | - | ------------ |  | - | ------------ | 
| |                                         |   | 2014         |  |   | 2013         | 
| | Deductible temporary
      differences: |   |              |  |   |              | 
| | Non-capital losses                      | $ | 45,712       |  | $ | 39,113       | 
| | Other
      credits and tax assets      |   | 842          |  |   | 782          | 
| | Share issuance costs                    |   | 1,893        |  |   | 754          | 
| | Deductible temporary differences        | $ | 48,447       |  | $ | 40,649       | 

|e) | Non-capital losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | At December 31, 2014, the Company has losses for income
      tax purposes in Canada and Mexico of $37,699 (December 31, 2013 - $34,001)
      and $11,073 (December 31, 2013 - $7,575), respectively, which may be used
      to reduce future taxable income. The Canadian losses, if not utilized,
      will expire beginning 2026 through to 2035, while the Mexican losses, if
      not utilized, will expire beginning 2018 through to 2026. Of these
      Canadian and Mexican amounts, $7,255 (December 31, 2013 - $4,705) and
      $3,912 (December 31, 2013 - $1,241), respectively, have been offset
      against recognized deferred tax liabilities.

|15. | EARNINGS PER SHARE
|--- | ------------------

Year ended
      December 31, 2014
    
    
    Year ended
      December 31, 2013Weighted
    
    
    
    
    
    
    
    
    WeightedEarnings
    
    
    average
    
    
    
    
    
    Earnings
    
    
    averagefor the
    
    
    shares
    
    
    Earnings
    
    
    for the
    
    
    shares
    
    
    Earningsyear
    
    
    outstanding
    
    
    per share
    
    
    year
    
    
    outstanding
    
    
    per shareBasic EPS
    $
    9,187
    
    
    161,297,692
    
    $
    0.06
    
    $
    15,343
    
    
    144,120,095
    
    $
    0.11Effect of dilutive securities:Share options
    
    
    
    
    707,469
    
    
    -
    
    
    -
    
    
    2,020,344
    
    
    -Diluted EPS
    $
    9,187
    
    
    162,005,161
    
    $
    0.06
    
    $
    15,343
    
    
    146,140,439
    
    $
    0.11


At December 31, 2014, 12,900,000
(December 31, 2013 - 11,375,000) share options were outstanding, of which
9,858,336 were anti-dilutive (December 31, 2013 - 6,825,000) because the
underlying exercise prices exceeded the average market price for the year ended
December 31, 2014 of the underlying common shares of C$1.51 (year ended December
31, 2013 - C$2.08) .

29

---

|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|16. | SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH
      FLOWS
|--- | --------------------------------------------------------

Significant non-cash transactions were
as follows:

Years ended
      December 31,Note
    
    
    2014
    
    
    2013Shares issued for asset
      acquisition (1)
    
    5
    
    $
    13,813
    
    $
    -Shares issued for debt issuance costs
      (2)
    
    13
    
    $
    -
    
    $
    407VAT used to settle income tax
      liabilities
    
    7
    
    $
    7,024
    
    $
    2,864Equipment financing
    
    9
    
    $
    -
    
    $
    3,214


| | (1) | On December 23, 2014, the Company completed the
      acquisition of Caballo Blanco (note 5) and issued 16,065,000 common shares
      for a value of C$16,065 ($13,813).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                          
| | (2) | At December 31, 2014, $nil (December 31, 2013 - $407) of
      share issuance costs were included in trade payables and accrued
      liabilities.                       

|17. | FINANCIAL INSTRUMENTS AND RISK
  MANAGEMENT
|--- | -------------------------------------------

|a) | Fair value measurement of financial assets and
      liabilities
|-- | ----------------------------------------------------------------

The Company has established a fair
value hierarchy that reflects the significance of inputs of valuation techniques
used in making fair value measurements as follows:

Level 1 - quoted prices in active
markets for identical assets or liabilities;

Level 2 - inputs other than quoted
prices included in Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. from derived prices); and

Level 3 - inputs for the asset or
liability that are not based upon observable market data.

At December 31, 2014 and 2013, none of
the Companys financial assets and liabilities are measured and recognized in
the consolidated statement of financial position at fair value.

The Company has determined the
estimated fair values of its financial instruments based upon appropriate
valuation methodologies.

At December 31, 2014 and 2013, there
were no financial assets or liabilities measured and recognized in the
consolidated statement of financial position at fair value that would be
categorized as Level 2 or Level 3 in the fair value hierarchy above.

|b) | Risk management
|-- | ---------------

The Companys primary business
activities consist of the acquisition, exploration, development and operation of
mineral resource properties in Mexico. The Company examines the various
financial risks to which it is exposed and assesses the impact and likelihood of
occurrence. These risks may include credit risk, commodity price risk, currency
risk, liquidity risk, and interest rate risk. The Companys risk management
program strives to evaluate the unpredictability of financial and commodity
markets and its objective is to minimize the potential adverse effects of such
risks on the Companys financial performance, where financially feasible to do
so. When deemed material, these risks may be monitored by the Companys
corporate finance group and they are regularly discussed with the Board of
Directors or one of its committees.

30

---

|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|17. | FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
      (Continued)
|--- | -----------------------------------------------------------

| | i.   | Credit risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      | Counterparty credit risk is the risk that the financial
      benefits of contracts with a specific counterparty will be lost if a
      counterparty defaults on its obligations under the contract. This includes
      any cash amounts owed to the Company by those counterparties, less any
      amounts owed to the counterparty by the Company where a legal right of
      set-off exists and also includes the fair values of contracts with
      individual counterparties which are recorded in the consolidated financial
      statements.                                                             
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      | The Companys credit risk is predominantly limited to
      cash and cash equivalent balances held in financial institutions, the
      recovery of VAT receivable from the Mexican tax authorities, any gold and
      silver sales and related receivables, prepaid expenses and advances to
      counterparties and other receivables. The maximum exposure to the credit
      risk is equal to the carrying value of such financial assets. At December
      31, 2014, the Company expects to recover the full amount of such
      assets.                                                                    
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      | The objective of managing counterparty credit risk is to
      minimize potential losses in financial assets. The Company assesses the
      quality of its counterparties, taking into account their credit worthiness
      and reputation, past performance and other factors.                                                                                                                                                                                                                                                                                                                                     
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      | Cash and cash equivalents are only deposited with or held
      by major financial institutions where the Company conducts its business.
      In order to manage credit and liquidity risk, the Company invests only in
      highly rated investment grade instruments that have maturities of three
      months or less. Limits are also established based on the type of
      investment, the counterparty and the credit rating.                                                                                                                                                                               
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      | Gold and silver sales are made to a limited number of
      large international organizations specializing in the precious metals
      markets. The Company believes them to be of sound credit worthiness, and
      to date, all receivables have been settled in accordance with agreed upon
      terms and conditions. The Mexican tax authorities with whom the Company
      holds a VAT receivable balance, are also deemed to be of sound credit
      worthiness.                                                                                                                                          
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ii.  | Commodity price risks                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      | The Company is exposed to price risk associated with the
      volatility of the market price of commodities, in particular gold and
      silver, and also too many consumables that are used in the production of
      gold and silver.                                                                                                                                                                                                                                                                                                                                                                            
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      | The prices of most commodities are determined in
      international markets and as such the Company has limited or no ability to
      control or predict the future level of most commodity prices. In some
      instances, the Company may have the ability to enter into derivative
      financial instruments to manage the Companys exposure to changes in the
      price of commodities such as gold, silver, oil and electricity. At this
      time, the Company has elected not to actively manage its exposure to
      commodity price risk through the use of derivative financial
      instruments.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | iii. | Currency risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      | The Companys functional currency is the US dollar and
      therefore the Companys earnings and total comprehensive income are
      impacted by fluctuations in the value of foreign currencies in relation to
      the US dollar.                                                                                                                                                                                                                                                                                                                                                                                
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      | The table below summarizes the net monetary assets and
      liabilities held in foreign currencies:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

December 31,
    
    
    December 31,2014
    
    
    2013Canadian dollar net monetary
      liabilities
    $
    (11,201
    )
    $
    (17,635
    )Mexican peso net monetary assets
    
    10,297
    
    
    7,540$
    (904
    )
    $
    (10,095
    )


31

---

|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|17. | FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
      (Continued)
|--- | -----------------------------------------------------------

| |     | The effect on earnings before income tax at December 31,
      2014 of a 10.0% appreciation in the foreign currencies against the US
      dollar on the above mentioned net monetary assets and liabilities of the
      Company is estimated to be a decrease of $100 (December 31, 2013 - $1,122)
      assuming that all other variables remained constant.                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | The effect on earnings before income tax at December 31,
      2014 of a 10.0% depreciation in the foreign currencies against the US
      dollar on the above mentioned financial and non-financial assets and
      liabilities of the Company is estimated to be an increase of $82 (December
      31, 2013 - $918) assuming that all other variables remained
    constant.                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | The calculations above are based on the Companys
      statement of financial position exposure at December 31, 2014.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | iv. | Liquidity risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | Liquidity risk is the risk that the Company will
      encounter difficulty in meeting obligations associated with its financial
      liabilities that are settled by delivering cash or another financial
      asset. The Company has a planning and budgeting process in place to help
      determine the funds required to support the Companys normal operating
      requirements and its exploration and production plans.                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | In the normal course of business, the Company enters into
      contracts and performs business activities that give rise to commitments
      for future minimum payments. The Company expects to discharge its
      commitments as they come due from its existing cash balances and cash flow
      from operations. The Company has no concentrations of liquidity
    risk.                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | A summary of future operating commitments is presented in
      note 20.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | v.  | Interest rate risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | The Companys interest revenue earned on cash and
      interest expense incurred on the loan facility and equipment financing are
      exposed to interest rate risk. The Company does not enter into derivative
      contracts to manage this risk, and the Companys exposure to interest rate
      risk is very low as the Company has a fixed interest rate on its loan
      facility and equipment financing. At December 31, 2014, a 1.0% increase of
      the effective interest rate on the loan facility would decrease its fair
      value by C$122 ($105) (December 31, 2013 - C$165 ($155)). Additionally, a
      1.0% decrease of the effective interest rate on the loan facility would
      increase its fair value by C$123 ($106) (December 31, 2012 - C$180
      ($169)).
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | At December 31, 2014, a 1.0% increase of the effective
      interest rate on the equipment financing would decrease its fair value by
      $11 (December 31, 2013 - $43). Additionally, a 1.0% decrease of the
      effective interest rate on the equipment financing would increase its fair
      value by $19 (December 31, 2013 - $44).                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | The Company has elected not to enter into interest rate
      swaps or other instruments to actively manage such risks.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | vi. | Fair value disclosures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | At December 31, 2014 and 2013, none of the Companys
      financial assets and liabilities are measured and recognized in the
      consolidated statement of financial position at fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | The carrying values of cash and cash equivalents, trade
      and other receivables, and trade payables and accrued liabilities
      approximate their fair value due to their short-term nature. The carrying
      value of the vendor loan approximates its fair value given its short-term
      nature.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     | The fair value of the equipment financing at December 31,
      2014 is $1,911 (December 31, 2013 - $3,189) as determined by discounting
      the future cash flows by a discount factor based on an interest rate of
      9.0% (December 31, 2013 - 7.8%), which reflects the Companys current rate
      of borrowing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

32

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|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|17. | FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Continued)
|--- | -----------------------------------------------------
|    |                                                      

The fair value of the loan facility at
December 31, 2014 is C$12,903 ($11,123) (December 31, 2013 - C$17,484 ($16,438))
as determined by discounting the future cash flows by a discount factor based on
an interest rate of 9.0% (December 31, 2013 - 12.1%), which reflects the
Companys current rate of borrowing.

|18. | RELATED PARTY TRANSACTIONS
|--- | --------------------------

The Companys related parties include
key management personnel and any transactions with such parties for goods and/or
services are made on regular commercial terms and are considered to be at arms
length. During the years ended December 31, 2014 and 2013, the Company did not
enter into any transactions with related parties.

Key management are those personnel
having the authority and responsibility for planning, directing, and controlling
the Company. Salaries and benefits, bonuses and share-based payments are
included in corporate and administrative expenses.

Key management compensation includes:

| |                       |   | Years ended
      December 31, | 
| | --------------------- | - | ------------------------------ | 
| |                       |   | 2014                           | 
| | Salaries and benefits | $ | 1,569                          | 
| | Bonuses               |   | 678                            | 
| | Share-based payments  |   | 973                            | 
| |                       | $ | 3,220                          | 

|19. | MANAGEMENT OF CAPITAL
|--- | ---------------------

The Companys objectives of capital
management are intended to safeguard the Companys normal operating requirements
on an ongoing basis and the continued development and exploration of its mineral
properties. The capital of the Company consists of the consolidated equity, loan
facility and equipment financing, net of cash.

| |                                 |   | December 31, |   |   | December 31, |  
| | ------------------------------- | - | ------------ | - | - | ------------ | -
| |                                 |   | 2014         |   |   | 2013         |  
| | Equity                          | $ | 213,777      |   | $ | 164,352      |  
| | Loan facility                   |   | 11,070       |   |   | 16,438       |  
| | Equipment financing             |   | 2,079        |   |   | 3,214        |  
| |                                 |   | 226,926      |   |   | 184,004      |  
| | Less: Cash and cash equivalents |   | (26,952      | ) |   | (22,776      | )
| |                                 | $ | 199,974      |   | $ | 161,228      |  

In order to facilitate the management
of its capital requirements, the Company prepares expenditure budgets that are
updated as necessary depending on various factors, including successful capital
deployment and general industry conditions.

The Company also has in place a
rigorous planning, budgeting and forecasting process which is used to identify
the amount of funds required to ensure the Company has appropriate liquidity to
meet short and long-term operating objectives. In order to maintain or adjust
its capital structure, the Company may issue new shares or debt.

At December 31, 2014, the Company
anticipates its capital resources and projected future cash flows from operation
of the San Francisco Mine to support its normal operating requirements on an
ongoing basis as well as the planned development and exploration of its mineral
and exploration properties. At December 31, 2014, the Company is not subject to
any externally imposed capital requirements.

33

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|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|20. | COMMITMENTS AND
CONTINGENCIES
|--- | -----------------------------

A summary of undiscounted liabilities
and future operating commitments at December 31, 2014 are as follows:

GreaterWithin
    
    
    2 - 5
    
    
    than 5Total
    
    
    1 year
    
    
    years
    
    
    yearsTrade payables and accrued
      liabilities
    $
    25,520
    
    $
    25,520
    
    $
    -
    
    $
    -Loan facility (C$13,000)
    
    11,070
    
    
    11,070
    
    
    -
    
    
    -Equipment financing
    
    2,079
    
    
    1,134
    
    
    945
    
    
    -Interest payments on loan facility andequipment financing
    
    1,151
    
    
    1,120
    
    
    31
    
    
    -Future operating commitments (1)(2)
    
    189,634
    
    
    77,347
    
    
    112,287
    
    
    -Provision for site
      reclamation and closure (3)
    
    2,312
    
    
    -
    
    
    -
    
    
    2,312Other provisions (4)
    
    1,127
    
    
    -
    
    
    1,127
    
    
    -Provision for contingent payment (note 5)
    
    5,000
    
    
    -
    
    
    5,000
    
    
    -$
    237,893
    
    $
    116,191
    
    $
    119,390
    
    $
    2,312


| | (1) | The future operating commitments of the Company are
      mainly due to the mining contract with Peal de Mexico, S.A. de C.V.
      (Peal). The original Peal contract was for 42 months, however an
      addendum was signed effective November 1, 2012 for five years (December
      31, 2014 - 34 months remaining) and covers substantially all mining
      services at a cost of $1.59 per tonne of material mined ($1.64 per the
      original contract). The Peal commitment is based on the forecasted minimum
      tonnage and estimated price of $1.62 to be mined until the end of the
      mining contract, and would be significantly less in the event that mining
      activities at the San Francisco Mine ceased. Operating commitments also
      includes a guarantee provided by the Company for the office premises at
      its corporate office.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (2) | Contractual commitments are defined as agreements that
      are enforceable and legally binding. Certain of the contractual
      commitments may contain cancellation clauses; however, the Company
      discloses the contractual maturities of the Company's operating
      commitments based on management's intent to fulfill the
  contracts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (3) | Provision for site reclamation and closure represents the
      undiscounted amount of the estimated cash flows required to settle the
      retirement obligations of the San Francisco Mine.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (4) | Other provisions represent the undiscounted amount of the
      demobilization costs related to the Peal contract, whereby the Company is
      responsible for demobilization costs of $900 payable one month prior to
      the end of the mining contract. This obligation has been recorded at an
      annualized discount rate of 1.4%, reflecting the implied interest rate,
      and calculated according to the formula stipulated in the contract. At
      December 31, 2014 this obligation was determined to be
  $1,127.                                                                                                                                                                                                                                                                                                                                         

Various tax and legal matters are
outstanding from time to time. In the event that managements estimate of the
future resolution of these matters changes, the Company will recognize the
effects of these changes in the consolidated financial statements on the date
such changes occur.

---

|TIMMINS GOLD CORP.                                               
|-----------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                   
|December 31, 2014                                                
|(In thousands of
      United States dollars, except where noted)

|21. | SEGMENTED INFORMATION
|--- | ---------------------

The Company has determined that it has
one reportable operating segment, being the acquisition, exploration, and
development of mineral properties located in Mexico. At December 31, 2014, all
of the Companys operating and capital assets are located in Mexico except for
$2,312 (December 31, 2013 - $1,508) of cash and cash equivalents and other
current assets which are held in Canada.

Reporting is prepared on a geographic
and consolidated basis as determined by the requirements of the Chief Executive
Officer as the chief operating decision maker for the Company. The Company does
not treat the production of gold and silver, the primary two minerals, as
separate operating segments as they are the output of the same production
process and only become separately identifiable as finished goods and are not
reported separately from a management perspective.

During the years ended December 31,
2014 and 2013, the Company had sales agreements with three major customers. The
percentage breakdown of metal revenues by major customer is as follows:

| |            |  | Years ended
      December 31, | 
| | ---------- |  | ------------------------------ | 
| |            |  | 2014                           | 
| | Customer A |  | 97%                            | 
| | Customer B |  | 2%                             | 
| | Customer C |  | 1%                             | 
| | Total      |  | 100%                           | 

Due to the nature of the gold market,
the Company is not dependent on any customers to sell the finished goods.

The Companys metal revenues from
operations for the years ended December 31, 2014 and 2013 are as follows:

| |                   |   | Years ended
      December 31, | 
| | ----------------- | - | ------------------------------ | 
| |                   |   | 2014                           | 
| | Gold              | $ | 152,533                        | 
| | Silver by-product |   | 1,535                          | 
| |                   | $ | 154,068                        | 

|22. | EVENTS AFTER THE REPORTING
PERIOD
|--- | ---------------------------------

| | a) | On February 2, 2015, the Company converted the loan
      facility into US dollars and finalized the extension to December 31, 2015.
      The C$13,000 principal balance was converted to $10,223 with all
      subsequent interest being paid in US dollars. In consideration for the
      extension the Company paid a C$130 ($112) bonus in cash and $10 in legal
      fees to the lender.                                                                                                                                                                                                      
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | b) | On February 17, 2015, the Company announced that it had
      entered into an agreement whereby the Company will acquire all of the
      issued and outstanding common shares of Newstrike Capital Inc.
      (Newstrike). Under the terms of the agreement, Newstrike shareholders
      will receive 0.90 (the Exchange Ratio) of a Company common share and
      C$0.0001 in cash for each Newstrike common share In addition, each
      outstanding option to purchase a Newstrike Share will be exchanged for an
      option to purchase a Company Share, based upon the Exchange
  Ratio.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | c) | On February 17, 2015, in connection with the Newstrike
      arrangement, the Company announced that it will undertake a non-brokered
      private placement of Company shares in an aggregate amount of up to
      C$10,000 at a price of C$1.25 per share. The proceeds of the private
      placement will be used to support the continued development of Newstrikes
      Ana Paula Gold Project.                                                                                                                                                                                              

35

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