----

----

----

| /s/ “David Adamson”                                                                David AdamsonPresident and Chief Executive Officer | /s/ “Robert Lewis”                                           Robert LewisChief Financial Officer |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| /s/ “David W. Adamson”David AdamsonPresident and Chief Executive Officer | /s/ “Robert Lewis”                                                      Robert LewisChief Financial Officer |
|--------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

|                                                    |   |             |        |   |                       |   |        |                          |   |
|---------------------------------------------------------|--------|------------------|-------------|--------|----------------------------|--------|-------------|-------------------------------|--------|
|                                                    |   | December 31 2011 |        |   | December 31 2010 (note 23) |   |        | January 1 2010 (note 23) |   |
| Assets                                                  |   |             |        |   |                       |   |        |                          |   |
| Current assets                                          |   |             |        |   |                       |   |        |                          |   |
| Cash and cash equivalents (note 21)                     |   | $                | 65,870,296  |   |                       | $      | 11,967,867  |                          |   | $ | 2,377,399 |   |
| Temporary investments (note 6)                          |   |             | -           |   |                       |   | 52,413,576  |                          |   |   | 125,418,231 |   |
| Marketable securities (note 7)                          |   |             | 3,252,672   |   |                       |   | 68,408      |                          |   |   | 66,532 |   |
| Accounts receivable                                     |   |             | 1,848,207   |   |                       |   | 2,111,463   |                          |   |   | 1,108,511 |   |
| Prepaid expenses and supplier advances                  |   |             | 265,702     |   |                       |   | 289,967     |                          |   |   | 333,343 |   |
|                                                    |   |             | 71,236,877  |   |                       |   | 66,851,281  |                          |   |   | 129,304,016 |   |
|                                                    |   |             |        |   |                       |   |        |                          |   |   |   |   |
| Other investments (note 8)                              |   |             | 772,138     |   |                       |   | 1,248,472   |                          |   |   | 1,127,819 |   |
| Property plant and equipment (note 9)                   |   |             | 17,847,744  |   |                       |   | 5,031,532   |                          |   |   | 987,245 |   |
| Exploration and evaluation assets (note 10)             |   |             | 188,590,629 |   |                       |   | 146,775,911 |                          |   |   | 99,331,485 |   |
| Reclamation deposits (note 11)                          |   |             | 1,686,224   |   |                       |   | 498,000     |                          |   |   | 498,000 |   |
|                                                    |   | $                | 280,133,612 |   |                       | $      | 220,405,196 |                          |   | $ | 231,248,565 |   |
| Liabilities                                             |   |             |        |   |                       |   |        |                          |   |   |   |   |
| Current liabilities                                     |   |             |        |   |                       |   |        |                          |   |   |   |   |
| Accounts payable and accrued liabilities (note 12)      |   | $                | 9,330,709   |   |                       | $      | 7,199,256   |                          |   | $ | 4,038,999 |   |
| Corporate income tax payable (note 16)                  |   |             | -           |   |                       |   | 7,150       |                          |   |   | - |   |
|                                                    |   |             | 9,330,709   |   |                       |   | 7,206,406   |                          |   |   | 4,038,999 |   |
| Non-Current liabilities                                 |   |             |        |   |                       |   |        |                          |   |   |   |   |
| Deferred income taxes (note 16)                         |   |             | 138,886     |   |                       |   | 205,180     |                          |   |   | 155,635 |   |
| Provision for closure and reclamation (note 13)         |   |             | 1,923,358   |   |                       |   | 394,392     |                          |   |   | - |   |
|                                                    |   |             | 11,392,953  |   |                       |   | 7,805,978   |                          |   |   | 4,194,634 |   |
| Equity                                                  |   |             |        |   |                       |   |        |                          |   |   |   |   |
| Share capital (note 14(a))                              |   |             | 327,311,371 |   |                       |   | 251,916,237 |                          |   |   | 249,825,227 |   |
| Share-based payment reserve (note 14(b))                |   |             | 17,097,729  |   |                       |   | 13,715,079  |                          |   |   | 5,629,777 |   |
| Accumulated other comprehensive income (loss) (note 15) |   |             | (1,145,992  | )      |                       |   | 93,854      |                          |   |   | (785,842 | ) |
| Deficit                                                 |   |             | (74,522,449 | )      |                       |   | (53,125,952 | )                             |   |   | (27,615,231 | ) |
|                                                    |   |             | 268,740,659 |   |                       |   | 212,599,218 |                          |   |   | 227,053,931 |   |
|                                                    |   | $                | 280,133,612 |   |                       | $      | 220,405,196 |                          |   | $ | 231,248,565 |   |

| Commitments (note 19)Subsequent event (note 22) |   |                          |
|-------------------------------------------------|--------|-------------------------------|
|                                            |   |                          |
| Approved by the Board of Directors:        |   |                          |
| “/s/ David Adamson”                 |   | “/s/ Julian Kemp” |
| David Adamson, Director                         |   | Julian Kemp, CA, Director     |

----

|                                                           |   | For the years ended December 31 |        |
|----------------------------------------------------------------|--------|---------------------------------|-------------|
|                                                           |   | 2011                            |        |   | 2010(note 23) |   |
|                                                           |   |                            |        |   |   |   |
| Expenses                                                       |   |                            |        |   |   |   |
| Consulting                                                     |   | $                               | 332,566     |   |   | $ | 543,178 |   |
| Depreciation                                                   |   |                            | 53,933      |   |   |   | 22,698 |   |
| General mineral exploration                                    |   |                            | 156,166     |   |   |   | 144,006 |   |
| Impairment of exploration and evaluation assets (note 10)      |   |                            | 14,732,137  |   |   |   | 14,093,878 |   |
| Insurance                                                      |   |                            | 610,325     |   |   |   | 510,962 |   |
| Investor relations (note 18)                                   |   |                            | 955,277     |   |   |   | 860,454 |   |
| Office and rent                                                |   |                            | 281,454     |   |   |   | 245,546 |   |
| Option payments received in excess of property costs (note 10) |   |                            | (1,054,388  | ) |   |   | (505,865 | ) |
| Professional fees                                              |   |                            | 1,392,881   |   |   |   | 535,447 |   |
| Salaries and benefits                                          |   |                            | 2,447,972   |   |   |   | 2,605,941 |   |
| Share based compensation (note 14(b,c))                        |   |                            | 1,395,365   |   |   |   | 5,812,100 |   |
| Transfer agent and regulatory filing fees                      |   |                            | 210,629     |   |   |   | 205,857 |   |
| Travel and accommodation                                       |   |                            | 175,947     |   |   |   | 358,060 |   |
| Loss before other items                                        |   |                            | (21,690,264 | ) |   |   | (25,432,262 | ) |
| Interest and other income                                      |   |                            | 477,476     |   |   |   | 463,583 |   |
| Foreign exchange gains (losses)                                |   |                            | (2,797      | ) |   |   | 3,121 |   |
| Loss on sale of investments                                    |   |                            | (264,044    | ) |   |   | (366,418 | ) |
| Other losses                                                   |   |                            | -           |   |   |   | (114,449 | ) |
| Loss before income taxes                                       |   |                            | (21,479,629 | ) |   |   | (25,446,425 | ) |
| Current income tax recovery (expense) (note 16)                |   |                            | 16,838      |   |   |   | (14,751 | ) |
| Deferred income tax recovery (expense) (note 16)               |   |                            | 66,294      |   |   |   | (49,545 | ) |
| Net loss for the year                                          |   | $                               | (21,396,497 | ) |   | $ | (25,510,721 | ) |
|                                                           |   |                            |        |   |   |   |   |   |
| Basic and diluted loss per common share                        |   | $                               | (0.10       | ) |   | $ | (0.12 | ) |
| Weighted average number of common shares outstanding           |   |                            | 223,992,408 |   |   |   | 213,523,163 |   |

----

|                                                                                        |   | For the years ended December 31 |        |
|---------------------------------------------------------------------------------------------|--------|---------------------------------|-------------|
|                                                                                        |   | 2011                            |        |   | 2010(note 23) |   |
|                                                                                        |   |                            |        |   |   |   |
| Net loss                                                                                    |   | $                               | (21,396,497 | ) |   | $ | (25,510,721 | ) |
|                                                                                        |   |                            |        |   |   |   |   |   |
| Other comprehensive income (loss)                                                           |   |                            |        |   |   |   |   |   |
| Fair value adjustments on available for sale financial instruments (net of tax):            |   |                            |        |   |   |   |   |   |
| Temporary investments                                                                       |   |                            | 37,004      |   |   |   | 28,761 |   |
| Marketable securities and other investments                                                 |   |                            | (1,540,894  | ) |   |   | 370,068 |   |
| Realized losses on marketable securities and other investments reclassified to net income   |   |                            | 264,044     |   |   |   | 366,418 |   |
| Impairment losses on marketable securities and other investments reclassified to net income |   |                            | -           |   |   |   | 114,449 |   |
| Other comprehensive income (loss)                                                           |   |                            | (1,239,846  | ) |   |   | 879,696 |   |
| Total comprehensive loss                                                                    |   | $                               | (22,636,343 | ) |   | $ | (24,631,025 | ) |

----

|                                                    |   | Number of Shares |        |   | Share Capital |   |        | Share-based Payments Reserve |   |   | Accumulated OtherComprehensiveIncome/(Loss) |   |   | Deficit |     |   | Total Equity |   |
|---------------------------------------------------------|--------|------------------|-------------|--------|---------------|--------|-------------|------------------------------|--------|--------|---------------------------------------------|--------|--------|---------|----------|--------|--------------|--------|
|                                                    |   |             |        |   | $             |   |        |                         | $      |   |                                        |   | $      |    |     |   | $            |   |   |   | $ |   |   |
| Balance - January 1, 2010                               |   |             | 213,218,014 |   |          |   | 249,825,227 |                         |   |   | 5,629,777                                   |   |   |    | (785,842 | )      |         |   | (27,615,231 | ) |   |   | 227,053,931 |   |
|                                                    |   |             |        |   |          |   |        |                         |   |   |                                        |   |   |    |     |   |         |   |   |   |   |   |   |   |
| Share issuance costs                                    |   |             | -           |   |          |   | (15,879     | )                            |   |   | -                                           |   |   |    | -        |   |         |   | - |   |   |   | (15,879 | ) |
| Exercise of options                                     |   |             | 931,000     |   |          |   | 933,960     |                         |   |   | -                                           |   |   |    | -        |   |         |   | - |   |   |   | 933,960 |   |
| Transfer to share capital on exercise of options        |   |             | -           |   |          |   | 543,790     |                         |   |   | (543,790                                    | )      |   |    | -        |   |         |   | - |   |   |   | - |   |
| Share-based payments - administration                   |   |             | -           |   |          |   | -           |                         |   |   | 5,812,100                                   |   |   |    | -        |   |         |   | - |   |   |   | 5,812,100 |   |
| Share-based payments - property                         |   |             | -           |   |          |   | -           |                         |   |   | 2,816,992                                   |   |   |    | -        |   |         |   | - |   |   |   | 3,032,127 |   |
| Share issues settling obligations                       |   |             | 145,660     |   |          |   | 629,139     |                         |   |   | -                                           |   |   |    | -        |   |         |   | - |   |   |   | 414,004 |   |
| Unrealized gain on available-for-sale investments       |   |             | -           |   |          |   | -           |                         |   |   | -                                           |   |   |    | 513,278  |   |         |   | - |   |   |   | 513,278 |   |
| Realized loss on sale of available-for-sale investments |   |             | -           |   |          |   | -           |                         |   |   | -                                           |   |   |    | 366,418  |   |         |   | - |   |   |   | 366,418 |   |
| Net loss for the year                                   |   |             | -           |   |          |   | -           |                         |   |   | -                                           |   |   |    | -        |   |         |   | (25,510,721 | ) |   |   | (25,510,721 | ) |
| Balance - December 31, 2010                             |   |             | 214,294,674 |   |          |   | 251,916,237 |                         |   |   | 13,715,079                                  |   |   |    | 93,854   |   |         |   | (53,125,952 | ) |   |   | 212,599,218 |   |

|                                                    |   | Number of Shares |        |   | Share Capital |   |        | Share-based Payments Reserve |   |   | Accumulated OtherComprehensiveIncome/(Loss) |   |   | Deficit |       |   | Total Equity |   |
|---------------------------------------------------------|--------|------------------|-------------|--------|---------------|--------|-------------|------------------------------|--------|--------|---------------------------------------------|--------|--------|---------|------------|--------|--------------|--------|
|                                                    |   |             |        |   | $             |   |        |                         | $      |   |                                        |   | $      |    |       |   | $            |   |   |   | $ |   |   |
| Balance - January 1, 2011                               |   |             | 214,294,674 |   |          |   | 251,916,237 |                         |   |   | 13,715,079                                  |   |   |    | 93,854     |   |         |   | (53,125,952 | ) |   |   | 212,599,218 |   |
|                                                    |   |             |        |   |          |   |        |                         |   |   |                                        |   |   |    |       |   |         |   |   |   |   |   |   |   |
| Share issuance costs                                    |   |             | -           |   |          |   | (459,689    | )                            |   |   | -                                           |   |   |    | -          |   |         |   | - |   |   |   | (459,689 | ) |
| Exercise of options                                     |   |             | 719,000     |   |          |   | 867,690     |                         |   |   | -                                           |   |   |    | -          |   |         |   | - |   |   |   | 867,690 |   |
| Transfer to share capital on exercise of options        |   |             | -           |   |          |   | 430,885     |                         |   |   | (430,885                                    | )      |   |    | -          |   |         |   | - |   |   |   | - |   |
| Agnico-Eagle Mines Ltd. private placement               |   |             | 21,671,827  |   |          |   | 70,000,001  |                         |   |   | -                                           |   |   |    | -          |   |         |   | - |   |   |   | 70,000,001 |   |
| Purchase of Phoenix Land Claims NSR                     |   |             | 1,216,071   |   |          |   | 4,256,249   |                         |   |   | -                                           |   |   |    | -          |   |         |   | - |   |   |   | 4,256,249 |   |
| Share-based payments - administration                   |   |             | -           |   |          |   | -           |                         |   |   | 1,590,710                                   |   |   |    | -          |   |         |   | - |   |   |   | 1,590,710 |   |
| Share-based payments – property                   |   |             | -           |   |          |   | -           |                         |   |   | 1,922,823                                   |   |   |    | -          |   |         |   | - |   |   |   | 1,922,823 |   |
| Share issues settling obligations                       |   |             | 53,097      |   |          |   | 299,998     |                         |   |   | 300,002                                     |   |   |    | -          |   |         |   | - |   |   |   | 600,000 |   |
| Unrealized loss on available-for-sale investments       |   |             | -           |   |          |   | -           |                         |   |   | -                                           |   |   |    | (1,503,890 | )      |         |   | - |   |   |   | (1,503,890 | ) |
| Realized loss on sale of available-for-sale investments |   |             | -           |   |          |   | -           |                         |   |   | -                                           |   |   |    | 264,044    |   |         |   | - |   |   |   | 264,044 |   |
| Net loss for the year                                   |   |             | -           |   |          |   | -           |                         |   |   | -                                           |   |   |    | -          |   |         |   | (21,396,497 | ) |   |   | (21,396,497 | ) |
| Balance – December 31, 2011                       |   |             | 237,954,669 |   |          |   | 327,311,371 |                         |   |   | 17,097,729                                  |   |   |    | (1,145,992 | )      |         |   | (74,522,449 | ) |   |   | 268,740,659 |   |

----

|                                                            |   | For the years ended December 31 |        |
|-----------------------------------------------------------------|--------|---------------------------------|-------------|
|                                                            |   | 2011                            |        |   | 2010 |   |
|                                                            |   |                            |        |   | (note 23) |   |
| Cash provided by (used for):                                    |   |                            |        |   |   |   |
| Operating activities                                            |   |                            |        |   |   |   |
| Net loss                                                        |   | $                               | (21,396,497 | ) |   | $ | (25,510,721 | ) |
| Adjustments for:                                                |   |                            |        |   |   |   |   |   |
| Depreciation                                                    |   |                            | 53,933      |   |   |   | 22,698 |   |
| Impairment of exploration and evaluation expenditures (note 10) |   |                            | 14,732,137  |   |   |   | 14,093,879 |   |
| Share-based compensation                                        |   |                            | 1,395,365   |   |   |   | 5,812,100 |   |
| Share receipts in excess of property costs                      |   |                            | (971,994    | ) |   |   | (201,181 | ) |
| Interest income                                                 |   |                            | (464,915    | ) |   |   | (463,583 | ) |
| Loss on sale of investment                                      |   |                            | 264,044     |   |   |   | 366,418 |   |
| Other losses                                                    |   |                            | 7,128       |   |   |   | 114,449 |   |
| Current income tax                                              |   |                            | -           |   |   |   | 7,150 |   |
| Deferred income tax (recovery) expense                          |   |                            | (66,294     | ) |   |   | 49,545 |   |
| Changes in non-cash working capital:                            |   |                            |        |   |   |   |   |   |
| Accounts receivable and prepaid expenses                        |   |                            | 287,522     |   |   |   | (959,576 | ) |
| Accounts payable and accrued liabilities                        |   |                            | (1,434,301  | ) |   |   | 1,632,855 |   |
| Interest received                                               |   |                            | 557,241     |   |   |   | 349,119 |   |
| Net cash used in operating activities                           |   |                            | (7,036,631  | ) |   |   | (4,686,848 | ) |
|                                                            |   |                            |        |   |   |   |   |   |
| Investing activities                                            |   |                            |        |   |   |   |   |   |
| Temporary investments                                           |   |                            | 52,378,410  |   |   |   | 73,147,880 |   |
| Exploration and evaluation expenditures                         |   |                            | (43,995,350 | ) |   |   | (56,444,420 | ) |
| Recovery of property costs                                      |   |                            | -           |   |   |   | 27,188 |   |
| Expenditures on property, plant and equipment, net of disposals |   |                            | (13,355,249 | ) |   |   | (3,834,993 | ) |
| Acquisition of marketable securities                            |   |                            | (3,670,015  | ) |   |   | - |   |
| Proceeds on sale of marketable securities                       |   |                            | 366,483     |   |   |   | 463,580 |   |
| Reclamation deposits                                            |   |                            | (1,193,224  | ) |   |   | - |   |
| Net cash provided by (used in) investing activities             |   |                            | (9,468,945  | ) |   |   | 13,359,235 |   |
|                                                            |   |                            |        |   |   |   |   |   |
| Financing activities                                            |   |                            |        |   |   |   |   |   |
| Issuance of  common shares                            |   |                            | 70,867,691  |   |   |   | 933,960 |   |
| Share issue costs                                               |   |                            | (459,686    | ) |   |   | (15,879 | ) |
| Net cash from financing activities                              |   |                            | 70,408,005  |   |   |   | 918,081 |   |
|                                                            |   |                            |        |   |   |   |   |   |
| Increase in cash and cash equivalents                           |   |                            | 53,902,429  |   |   |   | 9,590,468 |   |
| Cash and cash equivalents, beginning of the year                |   |                            | 11,967,867  |   |   |   | 2,377,399 |   |
| Cash and cash equivalents, end of the year                      |   | $                               | 65,870,296  |   |   | $ | 11,967,867 |   |

----

| 1. | NATURE AND CONTINUANCE OF OPERATIONS |
|----|--------------------------------------|

| 2. | SIGNIFICANT ACCOUNTING POLICIES |
|----|---------------------------------|

| a) | Basis of presentation and first-time adoption of International Financial Reporting Standards (“IFRS”) |
|----|-------------------------------------------------------------------------------------------------------------------|

| b) | Basis of consolidation |
|----|------------------------|

| Name of Subsidiary           |  Place of Operation |   | Ownership Interest |   | Principal Activity |
|------------------------------|--------------------------|--------|--------------------|--------|--------------------|
|                         |                     |   |               |   |               |
| 0691403 B.C. Ltd.            | British Columbia, Canada |   |               | 100%   |               | Holding company |
| 1304850 Ontario Inc.         | Ontario, Canada          |   |               | 100%   |               | Mineral property staking and sale |
| Rubicon Alaska Holdings Inc. | Alaska, United States    |   |               | 100%   |               | Mineral exploration |
| Rubicon Alaska Corp.         | Alaska, United States    |   |               | 100%   |               | Property holding company |
| Rubicon Minerals Nevada Inc. | British Columbia, Canada |   |               | 100%   |               | Holding company |
| Rubicon Nevada Corp.         | Nevada, United States    |   |               | 100%   |               | Mineral exploration |

----

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

| c) | Foreign currency translation |
|----|------------------------------|

| d) | Significant accounting judgments |
|----|----------------------------------|

|   | i) | The Company has selected a policy of capitalizing all exploration and evaluation expenditures on properties that it has an exploration license, as exploration and evaluation assets.  At each period end, the Company applies its judgment in determining whether facts and circumstances suggest that the carrying amount of the asset exceeds it recoverable amount, and if so the carrying value of the asset is tested for impairment.  In applying its judgment, the Company considers the history of exploration activity, the results of completed exploration, and future plans and ownership rights |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ii) | The classification of financial instruments as disclosed in note 2(o) will determine whether unrealized gains and losses in value are recorded to profit and loss or other comprehensive income.  The Company evaluates the attributes of its financial instruments in applying the classification criteria and in some cases is free to choose an appropriate category. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| e) | Sources of estimation uncertainty |
|----|-----------------------------------|

|   | i) | Property, plant and equipment, which currently consist of the Company’s fixed assets are depreciated based on the expected useful lives of the assets and their expected salvage value.  Estimated lives of assets may be dependent estimates of mine life or rates of deterioration of the asset itself.  Decay rates are based on historical experience with similar assets.  Estimates of mine life are based on internal or independent studies. These assets currently have a carrying amount of approximately $17.9 million – see note 9.  Further details of depreciation rates are stated in note 2(g). |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ii) | Impairment testing of exploration and evaluation assets deemed to have circumstance indicating a likelihood that carrying amounts exceed recoverable amounts.  As the Company has no cash generating units, a recoverable amount can only be calculated from estimated sales value less costs of sales. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | iii) | Deferred income tax asset carrying amounts depend on estimates of future taxable income and the likelihood of reversal of timing differences.  Where reversals are expected, estimates of future tax rates will be used in calculation of deferred tax asset carrying amounts.  Potential tax assets of $4,209,286 (note 16) were deemed not to be recoverable at the current year end. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | iv) | Provisions for reclamation and closure represent the Company’s estimate of the present value of the estimated future cost of reclamation.  This provision is highly sensitive to estimation uncertainty and it involves multiple estimates including the current estimated cost to rehabilitate sites, future inflation rates, factors applied to account for future estimation error, estimates of future risk free interest rates and estimates of the time until reclamation is implemented.  Inflation rates have been derived from Bank of Canada targets.  Risk free interest rates were derived from long-term Government of Canada bond rates.  Time to reclamation implementation is based on the Company’s estimate of potential life of mine using internal or independent reports. Details of the estimates and rates applied in the current year and resulting carrying amounts are described in note 13. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | v) | Share based compensation calculations are based on estimates of several variables including future exercise dates, future interest rates and future volatility of the Company’s share price.  See note 14 for a discussion of the factors used in the current year. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| g) | Property plant and equipment |
|----|------------------------------|

----

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

| h) | Exploration and Evaluation |
|----|----------------------------|

| i) | Impairment |
|----|------------|

----

| j) | Reclamation deposits |
|----|----------------------|

| k) | Provision for closure and reclamation |
|----|---------------------------------------|

| l) | Income taxes |
|----|--------------|

| m) | Flow-through Shares |
|----|---------------------|

| n) | Share capital |
|----|---------------|

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

----

| o) | Financial instruments |
|----|-----------------------|

|   i. |   | Financial assets at fair value through profit or loss |
|-----------|--------|-------------------------------------------------------|

| ii. | Loans and receivables |
|-----|-----------------------|

| iii. | Available-for-sale financial assets |
|------|-------------------------------------|

| p) | Share-based payments |
|----|----------------------|

----

| q) | Loss per share |
|----|----------------|

| 3. | ACCOUNTING STANDARDS, INTERPRETATIONS AND AMENDMENTS TO EXISTING STANDARDS THAT ARE NOT YET EFFECTIVE |
|----|-------------------------------------------------------------------------------------------------------|

|   | • | IFRS 10, Consolidated Financial Statements, replaces the guidance on control and consolidation in IAS 27, Consolidated and Separate Financial Statements, and SIC-12, Consolidation – Special Purpose Entities. IFRS 10 changes the definition of control under IFRS so that the same criteria are applied to all entities to determine control. The Company is currently evaluating the impact this standard may have on its consolidated financial statements. |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | IFRS 11, Joint Arrangements, replaces IAS 31, Interests in Joint Ventures. IFRS 11 reduces the types of joint arrangements to two: joint ventures and joint operations. IFRS 11 requires the use of equity accounting for interests in joint ventures, eliminating the existing policy choice of proportionate consolidation for jointly controlled entities under IAS 31. Entities that participate in joint operations will follow accounting much like that for jointly controlled assets and jointly controlled operations under IAS 31. The Company is currently evaluating the impact this standard may have on its consolidated financial statements. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | IFRS 12, Disclosure of Interests in Other Entities, sets out the disclosure requirements for entities reporting under IFRS 10 and IFRS 11, and replaces the disclosure requirements currently found in IAS 28, Investments in Associates.   The Company is currently evaluating the impact this standard may have on its consolidated financial statements. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | IFRS 13, Fair Value Measurement, this new standard sets out a framework for measuring fair value and the disclosure requirements for fair value measurements. The Company is currently evaluating the impact this standard may have on its consolidated financial statements. |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Amendment to IAS 1, Presentation of Financial Statements, requires an entity to group items presented in statement of other comprehensive income on the basis of whether they may be reclassified to profit or loss subsequent to initial recognition. For items presented before tax, the amendments also require that the tax related to the two separate groups to be presented separately. The Company is currently evaluating the impact this amendment may have on its consolidated financial statements. |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 3. |     ACCOUNTING STANDARDS, INTERPRETATIONS AND AMENDMENTS TO EXISTING STANDARDS THAT ARE NOT YET EFFECTIVE (continued) |
|----|-------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | IFRS 9, Financial Instruments, Classification and Measurement.  The Company is currently evaluating the impact this standard may have on its consolidated financial statements. |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4. |     CAPITAL MANAGEMENT |
|----|--------------------------------------------|

| 5. |     FINANCIAL INSTRUMENTS |
|----|-----------------------------------------------|

|                                         |   | Fair Value Level |   |   | 2011                             |   |       | 2010                             |   |
|----------------------------------------------|--------|------------------|--------|--------|----------------------------------|--------|------------|----------------------------------|--------|
|                                         |   |             |   |   | Available for sale at fair value |   |       | Available for sale at fair value |   |
|                                         |   |             |   |   | $                                |   |       |                             | $      |   |   |
| Financial assets:                            |   |             |   |   |                             |   |       |                             |   |   |   |
|                                         |   |             |   |   |                             |   |       |                             |   |   |   |
| Cash equivalents - Treasury bills            |   |             | 1      |   |                             |   | 58,470,577 |                             |   |   | - |   |
| Temporary investments – Treasury bills |   |             | 1      |   |                             |   | -          |                             |   |   | 52,413,576 |   |
| Marketable securities                        |   |             | 1      |   |                             |   | 3,252,672  |                             |   |   | 68,408 |   |
| Other investments                            |   |             | 1      |   |                             |   | 772,138    |                             |   |   | 1,248,472 |   |
| Reclamation deposits                         |   |             | 2      |   |                             |   | 1,686,224  |                             |   |   | 498,000 |   |
| Total                                        |   |             |   |   |                             |   | 64,181,611 |                             |   |   | 54,228,456 |   |

----

----

| 6. |     TEMPORARY INVESTMENTS |
|----|-----------------------------------------------|

| 7. |     MARKETABLE SECURITIES |
|----|-----------------------------------------------|

| 8. |     OTHER INVESTMENTS |
|----|-------------------------------------------|

| 9. |     PROPERTY, PLANT AND EQUIPMENT |
|----|-------------------------------------------------------|

|                       |   | Assets under Construction |       |   | Office Equipment |   |      | Mine-site Equipment |   |   | Mine-site Buildings |   |   | Total  |    |
|----------------------------|--------|---------------------------|------------|--------|------------------|--------|-----------|---------------------|--------|--------|---------------------|--------|--------|--------|---------|
|                       |   | $                         |       |   |             | $      |      |                |   | $      |                |   |   | $      |    |   |   | $ |   |   |
| Cost                       |   |                      |       |   |             |   |      |                |   |   |                |   |   |   |    |   |   |   |   |   |
| Balance, January 1, 2010   |   |                      | -          |   |             |   | 572,812   |                |   |   | 333,677             |   |   |   | 411,352 |   |   |   | 1,317,841 |   |
| Additions                  |   |                      | 2,750,499  |   |             |   | 140,702   |                |   |   | 1,202,260           |   |   |   | 302,932 |   |   |   | 4,396,393 |   |
| Disposals                  |   |                      | -          |   |             |   | (264      | )                   |   |   | -                   |   |   |   | -       |   |   |   | (264 | ) |
| Balance, December 31, 2010 |   |                      | 2,750,499  |   |             |   | 713,250   |                |   |   | 1,535,937           |   |   |   | 714,284 |   |   |   | 5,713,970 |   |
| Additions                  |   |                      | -          |   |             |   | 430,721   |                |   |   | 12,924,526          |   |   |   | -       |   |   |   | 13,355,247 |   |
| Transfers                  |   |                      | (1,229,795 | )      |             |   |      |                |   |   | 1,229,795           |   |   |   |    |   |   |   | - |   |
| Disposals                  |   |                      |       |   |             |   | (10,611   | )                   |   |   | -                   |   |   |   | -       |   |   |   | (10,611 | ) |
| Balance, December 31, 2011 |   |                      | 1,520,704  |   |             |   | 1,133,360 |                |   |   | 15,690,258          |   |   |   | 714,284 |   |   |   | 19,058,606 |   |
| Accumulated depreciation   |   |                      |       |   |             |   |      |                |   |   |                |   |   |   |    |   |   |   |   |   |
| Balance, January 1, 2010   |   |                      | -          |   |             |   | 277,631   |                |   |   | 38,488              |   |   |   | 14,477  |   |   |   | 330,596 |   |
| Depreciation for the year  |   |                      | -          |   |             |   | 125,356   |                |   |   | 191,128             |   |   |   | 35,384  |   |   |   | 351,868 |   |
| Disposals                  |   |                      | -          |   |             |   | (26       | )                   |   |   | -                   |   |   |   | -       |   |   |   | (26 | ) |
| Balance, December 31, 2010 |   |                      | -          |   |             |   | 402,961   |                |   |   | 229,616             |   |   |   | 49,861  |   |   |   | 682,438 |   |
| Depreciation for the year  |   |                      | -          |   |             |   | 198,082   |                |   |   | 298,433             |   |   |   | 40,392  |   |   |   | 536,907 |   |
| Disposals                  |   |                      | -          |   |             |   | (8,483    | )                   |   |   | -                   |   |   |   | -       |   |   |   | (8,483 | ) |
| Balance, December 31, 2011 |   |                      | -          |   |             |   | 592,560   |                |   |   | 528,049             |   |   |   | 90,253  |   |   |   | 1,210,862 |   |
| Carrying amounts           |   |                      |       |   |             |   |      |                |   |   |                |   |   |   |    |   |   |   |   |   |
| January 1, 2010            |   |                      | -          |   |             |   | 295,181   |                |   |   | 295,189             |   |   |   | 396,875 |   |   |   | 987,245 |   |
| December 31, 2010          |   |                      | 2,750,499  |   |             |   | 310,289   |                |   |   | 1,306,321           |   |   |   | 664,423 |   |   |   | 5,031,532 |   |
| December 31, 2011          |   |                      | 1,520,704  |   |             |   | 540,800   |                |   |   | 15,162,209          |   |   |   | 624,031 |   |   |   | 17,847,744 |   |

----

|                                  |   | Phoenix Gold ProjectRed Lake Ontario |        |   | Other Red Lake Properties Ontario |   |      | Alaska Properties USA |   |   | Nevada Properties USA |   |   | Total  |      |
|---------------------------------------|--------|--------------------------------------|-------------|--------|-----------------------------------|--------|-----------|-----------------------|--------|--------|-----------------------|--------|--------|--------|-----------|
|                                  |   | $                                    |        |   |                              | $      |      |                  |   | $      |                  |   |   | $      |      |   |   | $ |   |   |
| Balance,  January 1, 2010   |   |                                 | 57,562,789  |   |                              |   | 6,708,407 |                  |   |   | 27,972,435            |   |   |   | 7,087,854 |   |   |   | 99,331,485 |   |
| Costs incurred in the year            |   |                                 | 58,612,079  |   |                              |   | 2,271,643 |                  |   |   | 675,634               |   |   |   | 20,759    |   |   |   | 61,580,115 |   |
| Impairments                           |   |                                 | -           |   |                              |   | -         |                  |   |   | (14,093,878           | )      |   |   | -         |   |   |   | (14,093,878 | ) |
| Recoveries                            |   |                                 | -           |   |                              |   | (41,811   | )                     |   |   | -                     |   |   |   | -         |   |   |   | (41,811 | ) |
| Balance,  December 31, 2010 |   |                                 | 116,174,868 |   |                              |   | 8,938,239 |                  |   |   | 14,554,191            |   |   |   | 7,108,613 |   |   |   | 146,775,911 |   |
| Costs incurred in the year            |   |                                 | 56,545,044  |   |                              |   | 123,641   |                  |   |   | 177,946               |   |   |   | 8,324     |   |   |   | 56,854,955 |   |
| Impairments                           |   |                                 | -           |   |                              |   | -         |                  |   |   | (14,732,137           | )      |   |   | -         |   |   |   | (14,732,137 | ) |
| Recoveries                            |   |                                 | -           |   |                              |   | (308,100  | )                     |   |   | -                     |   |   |   | -         |   |   |   | (308,100 | ) |
| Balance, December 31, 2011            |   |                                 | 172,719,912 |   |                              |   | 8,753,780 |                  |   |   | -                     |   |   |   | 7,116,937 |   |   |   | 188,590,629 |   |

| (i) | Water Claims Agreement |
|-----|------------------------|

| (ii) | Land Claims Agreement |
|------|-----------------------|

| (iii) | Unpatented Claim |
|-------|------------------|

----

| Property              |   | Interest |    | Description | Location in Ontario          |
|-----------------------|--------|----------|---------|-------------|------------------------------|
| Adams Lake            |   |     | 100%    |        | 35 unpatented mining claims  | Balmer and Bateman townships |
| Advance               |   |     | 100%    |        | 13 patented mining claims    | Todd township |
| DMC                   |   |     | 100%    |        | 130 unpatented mining claims |  Dome, McDonough, Bateman and Fairlie townships |
| East Bay              |   |     | 100%    |        | 43 unpatented mining claims  | Bateman and Blackbear townships |
| Humlin Property       |   |     | 100%    |        | 31 unpatented mining claims  | Fairlie township |
| McCuaig Joint Venture |   |     | 60%     |        | 3 unpatented mining claims   | Dome township |
| Red Lake North        |   |     | 100%    |        | 48 unpatented mining claims  | Bateman, Black Bear Lake, McDonough and Coli Lake townships |
| Slate Bay             |   |     | 100%    |        | 28 unpatented mining claims  | McDonough, Dome and Graves townships |
| Westend               |   |     | 100%    |        | 3 unpatented claims          | Todd townships |
| Wolf Bay              |   |     | 50-100% |        | 23 unpatented mining claims  | Todd and Hammell Lake townships |

| Property            |   | Interest                        |   | Description                                   | Location                                       |
|---------------------|--------|---------------------------------|--------|-----------------------------------------------|------------------------------------------------|
| Nevada – Utah |   | Majority 100% owned (see below) |   | Approximately 225,000 acres (91,054 hectares) | Elko County, Nevada and Box Elder County, Utah |
| New Horizon, Alaska |   |                            | 100%   |                                          | Approximately 65,560 acres                     | Goodpaster Mining District |

----

| 11. |     RECLAMATION DEPOSITS |
|-----|----------------------------------------------|

| 12. |     TRADE AND OTHER PAYABLES |
|-----|--------------------------------------------------|

|                                |   | December 31 2011 |      |   | December 31 2010 |   |      | January 1 2010 |   |
|-------------------------------------|--------|------------------|-----------|--------|------------------|--------|-----------|---------------------|--------|
| Trade payables                      |   | $                | 4,208,516 |   |             | $      | 1,423,148 |                |   | $ | 3,263,686 |   |
| Payables to related party (note 17) |   |             | 70,000    |   |             |   | -         |                |   |   | 5,000 |   |
| Compensation payable                |   |             | 1,218,703 |   |             |   | 1,447,639 |                |   |   | 493,518 |   |
| Accrued expenses                    |   |             | 3,194,068 |   |             |   | 3,519,879 |                |   |   | 26,101 |   |
| Other                               |   |             | 639,422   |   |             |   | 808,590   |                |   |   | 250,694 |   |
| Total                               |   | $                | 9,330,709 |   |             | $      | 7,199,256 |                |   | $ | 4,038,999 |   |

----

| 13. |     PROVISION FOR CLOSURE AND RECLAMATION |
|-----|---------------------------------------------------------------|

| Balance January 1, 2010               |   | $ Nil |      |
|---------------------------------------|--------|------------|-----------|
| Recognition of obligation at year end |   |       | 394,392   |   |
| Balance December, 31, 2010            |   |       | 394,392   |   |
| Accretion                             |   |       | 20,158    |   |
| Revision of estimate                  |   |       | 1,508,808 |   |
| Balance December 31, 2011             |   | $          | 1,923,358 |   |

| 14. |     SHARE CAPITAL |
|-----|---------------------------------------|

----

|                         |   | 2011             |      |   | 2010                            |   |
|------------------------------|--------|------------------|-----------|--------|---------------------------------|--------|
|                         |   | Number of Shares |      |   | Weighted Average Exercise Price |   |   | Number ofShares |   |   | Weighted Average Exercise Price |   |
|                         |   |             |      |   |                            |   |   | $ |   |   |   | $ |   |   |
| Balance at beginning of year |   |             | 7,578,000 |   |                            |   | 2.82 |   |   |   | 5,755,000 |   |   |   | 1.46 |   |
| Granted                      |   |             | 3,431,696 |   |                            |   | 5.72 |   |   |   | 3,059,000 |   |   |   | 5.02 |   |
| Exercised(1)                 |   |             | (719,000  | )      |                            |   | 1.21 |   |   |   | (931,000 | ) |   |   | 1.00 |   |
| Expired/cancelled            |   |             | (394,700  | )      |                            |   | 5.27 |   |   |   | (305,000 | ) |   |   | 4.81 |   |
| Outstanding at end of year   |   |             | 9,895,996 |   |                            |   | 3.84 |   |   |   | 7,578,000 |   |   |   | 2.82 |   |
| Exercisable at end of year   |   |             | 8,355,498 |   |                            |   | 3.49 |   |   |   | 6,281,000 |   |   |   | 2.37 |   |

| December 31, 2011   |         |   |               |      |      |                   |   |   |                  |   |
|---------------------|--------------|--------|--------------------|-----------|-----------|------------------------|--------|--------|-----------------------|--------|
| Option Price Range  |         |   | Number Outstanding |      |      | Weighted Average Price |   |   | Weighted Average Life |   |
|                |         |   |               |      |      | $                      |   |   |                  | Years  |   |
| $                   | 0.74 - $1.04 |   |               |      | 1,205,000 |                   |   |   | 1.00                  |   |   |   | 1.02 |   |
| $                   | 1.31 - $1.46 |   |               |      | 1,930,000 |                   |   |   | 1.31                  |   |   |   | 2.00 |   |
| $                   | 1.68 - $3.63 |   |               |      | 855,000   |                   |   |   | 2.63                  |   |   |   | 1.95 |   |
| $                   | 3.96 - $4.53 |   |               |      | 545,000   |                   |   |   | 4.22                  |   |   |   | 3.18 |   |
| $                   | 5.22         |   |               |      | 2,310,000 |                   |   |   | 5.22                  |   |   |   | 3.04 |   |
| $                   | 5.80         |   |               |      | 3,050,996 |                   |   |   | 5.80                  |   |   |   | 3.76 |   |
| Total Stock Options |         |   |               | 9,895,996 |      |                   |   | 3.84   |                  |   |   | 2.73 |   |

|                            |   | 2011      |   |   | 2010      |   |
|---------------------------------|--------|-----------|--------|--------|-----------|--------|
| Weighted average share price    |   | $         | 3.56   |   |      | $      | 5.02 |   |
| Weighted average exercise price |   | $         | 5.72   |   |      | $      | 5.02 |   |
| Risk-free interest rate         |   |      | 1.86   | %      |      |   | 2.32 | % |
| Expected life                   |   | 2.9 Years |   |   | 3.5 Years |   |
| Expected volatility             |   |      | 63     | %      |      |   | 77 | % |
| Expected dividend yield         |   |      | 0      | %      |      |   | 0 | % |

----

| 15. |     ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) |
|-----|-----------------------------------------------------------------------|

|                                                                                              |   | 2011   |       |   | 2010   |   |
|---------------------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
| Components of accumulated other comprehensive income (loss) end of the year:                      |   |   |       |   |   |   |
|                                                                                              |   |   |       |   |   |   |
| Unrealized losses on cash equivalents and temporary investments                                   |   | $      | (4,499     | )      |   | $      | (41,501 | ) |
| Unrealized gains (losses) on marketable securities and other investments in public company shares |   |   | (1,141,494 | )      |   |   | 135,355 |   |
|                                                                                              |   |   |       |   |   |   |   |   |
|                                                                                              |   |   |       |   |   |   |   |   |
|                                                                                              |   | $      | (1,145,993 | )      |   | $      | 93,854 |   |

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

----

|                                                              |   | 2011   |        |   | 2010   |   |
|-------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|
|                                                              |   | $      |        |   |   | $      |   |   |
| Net loss for the year, before taxes                               |   |   | (21,479,629 | )      |   |   | (25,446,425 | ) |
| Blended statutory tax rate                                        |   |   | 29.22       | %      |   |   | 30.35 | % |
| Expected income tax recovery                                      |   |   | 6,276,276   |   |   |   | 7,722,659 |   |
| Net adjustment for current, deductible and non-deductible amounts |   |   | (3,934,165  | )      |   |   | (5,531,622 | ) |
| Unrecognized benefit of non-capital losses                        |   |   | (2,258,979  | )      |   |   | (2,255,333 | ) |
| Income tax recovery (expense), net                                |   |   | 83,132      |   |   |   | ( 64,296 | ) |

|                                                           |   | 2011   |       |   | 2010   |   |       | January 1 2010 |   |
|----------------------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|----------------|--------|
|                                                           |   | $      |       |   |   | $      |       |           |   | $ |   |   |
| Deferred income tax assets (liabilities):                      |   |   |       |   |   |   |       |           |   |   |   |   |
| Net mineral property carrying amounts in excess of tax pools   |   |   | (8,411,735 | )      |   |   | (8,775,063 | )              |   |   | (9,008,082 | ) |
| Equipment and intangible tax pools in excess of carrying value |   |   | 534,669    |   |   |   | 402,563    |           |   |   | 314,536 |   |
| Non-taxable mark-to-market losses (gains) on investments       |   |   | 38,339     |   |   |   | (21,230    | )              |   |   | 88,593 |   |
| Share issue cost pool                                          |   |   | 880,613    |   |   |   | 1,262,830  |           |   |   | 1,776,853 |   |
| Tax loss carry-forwards                                        |   |   | 11,028,514 |   |   |   | 9,142,726  |           |   |   | 7,686,537 |   |
|                                                           |   |   | 4,070,400  |   |   |   | 2,011,826  |           |   |   | 858,437 |   |
| Amounts not recognized                                         |   |   | (4,209,286 | )      |   |   | (2,217,006 | )              |   |   | (1,014,072 | ) |
| Net deferred income tax liabilities                            |   |   | (138,886   | )      |   |   | (205,180   | )              |   |   | (155,635 | ) |

| 17. |     RELATED PARTY TRANSACTIONS |
|-----|----------------------------------------------------|

| Compensation                 |   | 2011   |      |   | 2010   |   |
|------------------------------|--------|--------|-----------|--------|--------|--------|
|                         |   | $      |      |   |   | $      |   |   |
| Short-term employee benefits |   |   | 4,172,091 |   |   |   | 4,667,306 |   |
| Share-based payments         |   |   | 1,196,229 |   |   |   | 4,666,000 |   |
|                         |   |   | 5,368,320 |   |   |   | 9,333,306 |   |

----

| 18. |     INVESTOR RELATIONS |
|-----|--------------------------------------------|

|                       |   | 2011   |    |   | 2010   |   |
|----------------------------|--------|--------|---------|--------|--------|--------|
|                       |   | $      |    |   |   | $      |   |   |
| Salaries & benefits    |   |   | 423,718 |   |   |   | 295,476 |   |
| Travel & accommodation |   |   | 148,633 |   |   |   | 122,576 |   |
| Shareholder communication  |   |   | 209,312 |   |   |   | 135,401 |   |
| Other                      |   |   | 173,614 |   |   |   | 307,001 |   |
| Total                      |   |   | 955,277 |   |   |   | 860,454 |   |

| 19. |     COMMITMENTS |
|-----|-------------------------------------|

|   | (a) | At December 31, 2011, the Company has the following lease, rental and contractual commitments, made for the Company’s office premises, staff accommodations and various contractual obligations made for the acquisition of equipment and to further develop the Company’s Phoenix Gold project: |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                  |   | December 31 2011 |    |   | December 31 2010 |   |      | January 1 2010 |   |
|-----------------------|--------|------------------|---------|--------|------------------|--------|-----------|---------------------|--------|
| Less than 1 year      |   | $                | 315,247 |   |             | $      | 3,695,950 |                |   | $ | 67,849 |   |
| Between 1 and 2 years |   |             | 162,114 |   |             |   | 185,325   |                |   |   | - |   |
| Total                 |   | $                | 477,361 |   |             | $      | 3,881,275 |                |   | $ | 67,849 |   |

|   | (b) | The Company is required to make certain cash payments, incur exploration costs and pay certain advance royalty amounts (note 10) to maintain its mineral properties in good standing.  These payments and costs are at the Company’s discretion and are based upon available financial resources and the exploration merits of the mineral properties which are evaluated on a periodic basis. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 20. |     SEGMENTED INFORMATION |
|-----|-----------------------------------------------|

| 21. |     SUPPLEMENTAL CASH FLOW AND NON-CASH ACTIVITIES |
|-----|------------------------------------------------------------------------|

|                                                                            |   | December 31 2011 |       |   | December 31 2010 |   |
|---------------------------------------------------------------------------------|--------|-----------------------|------------|--------|-----------------------|--------|
| Cash                                                                            |   | $                     | 1,135,218  |   |                  | $      | 2,916,371 |   |
| Government of Canada treasury bills and bank guaranteed investment certificates |   |                  | 64,735,077 |   |                  |   | 9,051,496 |   |
|                                                                            |   | $                     | 65,870,295 |   |                  | $      | 11,967,867 |   |

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

----

| 23. |     TRANSITION TO IFRS |
|-----|--------------------------------------------|

|   | (a) | Deferred Income Taxes |
|--------|-----|-----------------------|

----

| Impact on Consolidated Balance Sheets                         |   | December 31, 2010 |       |   | January 1, 2010 |   |
|---------------------------------------------------------------|--------|-------------------|------------|--------|-----------------|--------|
|                                                          |   | $                 |       |   |            | $      |   |   |
| Mineral properties/exploration and evaluation assets          |   |              | (7,727,892 | )      |            |   | (14,797,848 | ) |
| Future income taxes/deferred income taxes                     |   |              | 4,930,853  |   |            |   | 13,235,693 |   |
| Deficit                                                       |   |              | 2,797,039  |   |            |   | 1,562,155 |   |
|                                                          |   |              |       |   |            |   |   |   |
| Impact on Consolidated Statements of Comprehensive Loss  |   | December 31, 2010 |       |   |            |   |   |
|                                                          |   |              |       |   |            | $      |   |   |
| Mineral property impairment                                   |   |              | (7,069,956 | )      |            |   |   |   |
| Foreign exchange gains                                        |   |              | 724,580    |   |            |   |   |   |
| Future Income tax expense/deferred tax expense                |   |              | 7,580,260  |   |            |   |   |   |
| Comprehensive loss                                            |   |              | 1,234,884  |   |            |   |   |   |

|   | (b) | Flow-through Shares |
|--------|-----|---------------------|

----

| 23. | TRANSITION TO IFRS (continued) |
|-----|--------------------------------|

| Impact on Consolidated Balance Sheets                   |   | December 31, 2010 |       |   | January 1, 2010 |   |
|---------------------------------------------------------|--------|-------------------|------------|--------|-----------------|--------|
|                                                    |   | $                 |       |   |            | $      |   |   |
| Share capital                                           |   |              | (3,433,637 | )      |            |   | (3,433,637 | ) |
| Deficit                                                 |   |              | 3,433,637  |   |            |   | 3,433,637 |   |
|                                                    |   |              |       |   |            |   |   |   |
| Impact on Consolidated Statements of Comprehensive Loss |   | December 31, 2010 |       |   |            |   |   |
| Comprehensive loss                                      |   | No Impact         |       |   |            |   |   |

|   | (c) | Share Based Payments |
|--------|-----|----------------------|

| Impact on Consolidated Balance Sheets                   |   | December 31, 2010 |    |   | January 1, 2010 |   |
|---------------------------------------------------------|--------|-------------------|---------|--------|-----------------|--------|
|                                                    |   | $                 |    |   |            | $      |   |   |
| Mineral properties/exploration and evaluation assets    |   |              | (80,500 | )      |            |   | (80,500 | ) |
| Contributed surplus/share based payments reserve        |   |              | 81,625  |   |            |   | 120,750 |   |
| Deficit                                                 |   |              | (1,125  | )      |            |   | (40,250 | ) |
|                                                    |   |              |    |   |            |   |   |   |
| Impact on Consolidated Statements of Comprehensive Loss |   | December 31, 2010 |    |   |            |   |   |
|                                                    |   |  $           |    |   |            |   |   |   |
| Share-based compensation                                |   |              | 39,125  |   |            |   |   |   |
| Comprehensive loss                                      |   |              | 39,125  |   |            |   |   |   |

|   | (d) | Stock Appreciation Rights |
|--------|-----|---------------------------|

----

| Impact on Consolidated Balance Sheets                   |   | December 31, 2010 |     |   | January 1, 2010 |   |
|---------------------------------------------------------|--------|-------------------|----------|--------|-----------------|--------|
|                                                    |   | $                 |     |   |            | $      |   |   |
| Mineral properties/exploration and evaluation assets    |   |              | 20,226   |   |            |   | - |   |
| Accounts payable                                        |   |              | (207,232 | )      |            |   | - |   |
| Deficit                                                 |   |              | 187,006  |   |            |   | - |   |
|                                                    |   |              |     |   |            |   |   |   |
| Impact on Consolidated Statements of Comprehensive Loss |   | December 31, 2010 |     |   |            |   |   |
|                                                    |   |  $           |     |   |            |   |   |   |
| share-based payments                                    |   |              | 187,006  |   |            |   |   |   |
| Comprehensive loss                                      |   |              | 187,006  |   |            |   |   |   |
|                                                    |   |              |     |   |            |   |   |   |

|   | (e) | Provision for Closure and Reclamation (Asset Retirement Obligations) (“ARO”) |
|--------|-----|------------------------------------------------------------------------------------------|

| Impact on Consolidated Balance Sheets                                        |   | December 31, 2010 |     |   | January 1, 2010 |   |
|------------------------------------------------------------------------------|--------|-------------------|----------|--------|-----------------|--------|
|                                                                         |   | $                 |     |   |            | $      |   |   |
| Mineral properties/exploration and evaluation assets                         |   |              | 270,385  |   |            |   | - |   |
| Asset retirement obligation/provision for closure  and reclamation |   |              | (270,385 | )      |            |   | - |   |
|                                                                         |   |              |     |   |            |   |   |   |
| Impact on Consolidated Statements of Comprehensive Loss                      |   | December 31, 2010 |     |   |            |   |   |
| Comprehensive loss                                                           |   | No Impact         |     |   |            |   |   |

|   | (f) | Reconciliation to previously reported financial statements |
|--------|-----|------------------------------------------------------------|

----

|                                                  |   |    |    |   | January 1, 2010 |        |
|-------------------------------------------------------|--------|---------|---------|--------|-----------------|-------------|
|                                                  |   | Note 23 |    |   | CanadianGAAP    |        |   | Effect of transition to IFRS |   |   | IFRS |   |
|                                                  |   |    |    |   |            |        |   |   |   |   |   |   |
| Assets                                                |   |    |    |   |            |        |   |   |   |   |   |   |
|                                                  |   |    |    |   |            |        |   |   |   |   |   |   |
| Current assets:                                       |   |    |    |   |            |        |   |   |   |   |   |   |
| Cash and cash equivalents                             |   |    |    |   | $               | 2,377,399   |   |   | $ | - |   |   | $ | 2,377,399 |   |
| Temporary investments                                 |   |    |    |   |            | 125,418,231 |   |   |   | - |   |   |   | 125,418,231 |   |
| Marketable securities                                 |   |    |    |   |            | 66,532      |   |   |   | - |   |   |   | 66,532 |   |
| Accounts receivable                                   |   |    |    |   |            | 1,108,511   |   |   |   | - |   |   |   | 1,108,511 |   |
| Prepaid expenses and supplier advances                |   |    |    |   |            | 333,343     |   |   |   | - |   |   |   | 333,343 |   |
|                                                  |   |    |    |   |            | 129,304,016 |   |   |   |   |   |   |   | 129,304,016 |   |
| Non-current assets:                                   |   |    |    |   |            |        |   |   |   |   |   |   |   |   |   |
| Other investments                                     |   |    |    |   |            | 1,127,819   |   |   |   | - |   |   |   | 1,127,819 |   |
| Buildings and equipment/property, plant and equipment |   |    |    |   |            | 987,245     |   |   |   | - |   |   |   | 987,245 |   |
| Mineral properties/exploration and evaluation assets  |   |    | (a, c)  |   |            |        | 114,209,833 |   |   |   | (14,878,348 | ) |   |   | 99,331,485 |   |
| Reclamation deposits                                  |   |    |    |   |            |        | 498,000 |   |   |   | - |   |   |   | 498,000 |   |
|                                                  |   |    |    |   |            | $           | 246,126,913 |   |   | $ | (14,878,348 | ) |   | $ | 231,248,565 |   |
|                                                  |   |    |    |   |            |        |   |   |   |   |   |   |   |   |   |   |
| Liabilities and equity                                |   |    |    |   |            |        |   |   |   |   |   |   |   |   |   |   |
|                                                  |   |    |    |   |            |        |   |   |   |   |   |   |   |   |   |   |
| Current liabilities:                                  |   |    |    |   |            |        |   |   |   |   |   |   |   |   |   |   |
| Accounts payable and accrued liabilities              |   |    |    |   |            | $           | 4,038,999 |   |   | $ | - |   |   | $ | 4,038,999 |   |
|                                                  |   |    |    |   |            |        | 4,038,999 |   |   |   | - |   |   |   | 4,038,999 |   |
|                                                  |   |    |    |   |            |        |   |   |   |   |   |   |   |   |   |   |
| Non-current liabilities:                              |   |    |    |   |            |        |   |   |   |   |   |   |   |   |   |   |
|                                                  |   |    |    |   |            |        |   |   |   |   |   |   |   |   |   |   |
| Future income taxes/deferred income taxes        |   | (a)     |    |   |            | 13,391,328  |   |   |   | (13,235,693 | ) |   |   | 155,635 |   |
|                                                  |   |    |    |   |            |        | 17,430,327 |   |   |   | (13,235,693 | ) |   |   | 4,194,634 |   |
| Equity:                                               |   |    |    |   |            |        |   |   |   |   |   |   |   |   |   |   |
| Share capital                                         |   | (b)     |    |   |            | 246,391,590 |   |   |   | 3,433,637 |   |   |   | 249,825,227 |   |
| Contributed surplus/share-based payments reserve      |   | (c)     |    |   |            | 5,750,527   |   |   |   | (120,750 | ) |   |   | 5,629,777 |   |
| Accumulated other comprehensive income                |   |    |    |   |            |        | (785,842 | ) |   |   | - |   |   |   | (785,842 | ) |
| Deficit                                               |   |    | (a,b,c) |   |            |        | (22,659,689 | ) |   |   | (4,955,542 | ) |   |   | (27,615,231 | ) |
|                                                  |   |    |    |   |            |        | 228,696,586 |   |   |   | (1,642,655 | ) |   |   | 227,053,931 |   |
|                                                  |   |    |    |   |            | $           | 246,126,913 |   |   | $ | (14,878,348 | ) |   | $ | 231,248,565 |   |

----

| 23. | TRANSITION TO IFRS (continued) |
|-----|--------------------------------|

|                                                              |   |    |      |   | December 31, 2010 |        |
|-------------------------------------------------------------------|--------|---------|-----------|--------|-------------------|-------------|
|                                                              |   | Note 23 |      |   | CanadianGAAP      |        |   | Effect of transition to IFRS |   |   | IFRS |   |
|                                                              |   |    |      |   |              |        |   |   |   |   |   |   |
| Assets                                                            |   |    |      |   |              |        |   |   |   |   |   |   |
|                                                              |   |    |      |   |              |        |   |   |   |   |   |   |
| Current assets:                                                   |   |    |      |   |              |        |   |   |   |   |   |   |
| Cash and cash equivalents                                         |   |    |      |   | $                 | 11,967,867  |   |   | $ | - |   |   | $ | 11,967,867 |   |
| Temporary investments                                             |   |    |      |   |              | 52,413,576  |   |   |   | - |   |   |   | 52,413,576 |   |
| Marketable securities                                             |   |    |      |   |              | 68,408      |   |   |   | - |   |   |   | 68,408 |   |
| Accounts receivable                                               |   |    |      |   |              | 2,111,463   |   |   |   | - |   |   |   | 2,111,463 |   |
| Prepaid expenses and supplier advances                            |   |    |      |   |              | 289,967     |   |   |   | - |   |   |   | 289,967 |   |
|                                                              |   |    |      |   |              | 66,851,281  |   |   |   | - |   |   |   | 66,851,281 |   |
| Non-current assets                                                |   |    |      |   |              |        |   |   |   |   |   |   |   |   |   |
| Other investments                                                 |   |    |      |   |              | 1,248,472   |   |   |   | - |   |   |   | 1,248,472 |   |
| Buildings and equipment/property, plant and equipment             |   |    |      |   |              | 5,031,532   |   |   |   | - |   |   |   | 5,031,532 |   |
| Minerals properties/exploration and evaluation assets             |   |    | (a,c,d,e) |   |              |        | 154,293,692 |   |   |   | (7,517,781 | ) |   |   | 146,775,911 |   |
| Reclamation deposits                                              |   |    |      |   |              |        | 498,000 |   |   |   | - |   |   |   | 498,000 |   |
|                                                              |   |    |      |   |              | $           | 227,922,977 |   |   | $ | (7,517,781 | ) |   | $ | 220,405,196 |   |
|                                                              |   |    |      |   |              |        |   |   |   |   |   |   |   |   |   |   |
| Liabilities and Equity                                            |   |    |      |   |              |        |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |    |      |   |              |        |   |   |   |   |   |   |   |   |   |   |
| Current liabilities:                                              |   |    |      |   |              |        |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |    |      |   |              |        |   |   |   |   |   |   |   |   |   |   |
| Accounts payable and accrued liabilities                          |   | (d)     |      |   | $                 | 6,992,024   |   |   | $ | 207,232 |   |   | $ | 7,199,256 |   |
| Income tax payable                                                |   |    |      |   |              |        | 7,150 |   |   |   | - |   |   |   | 7,150 |   |
|                                                              |   |    |      |   |              |        | 6,999,174 |   |   |   | 207,232 |   |   |   | 7,206,406 |   |
|                                                              |   |    |      |   |              |        |   |   |   |   |   |   |   |   |   |   |
| Non-current liabilities:                                          |   |    |      |   |              |        |   |   |   |   |   |   |   |   |   |   |
| Future income taxes/deferred income taxes                    |   | (a)     |      |   |              | 5,136,033   |   |   |   | (4,930,853 | ) |   |   | 205,180 |   |
| Asset retirement obligation/provision for closure and reclamation |   | (e)     |      |   |              | 124,007     |   |   |   | 270,385 |   |   |   | 394,392 |   |
|                                                              |   |    |      |   |              |        | 12,259,214 |   |   |   | (4,453,236 | ) |   |   | 7,805,978 |   |
|                                                              |   |    |      |   |              |        |   |   |   |   |   |   |   |   |   |   |
| Share capital                                                     |   | (b)     |      |   |              | 248,482,600 |   |   |   | 3,433,637 |   |   |   | 251,916,237 |   |
| Contributed surplus/share-based payments reserve                  |   | (c)     |      |   |              | 13,796,704  |   |   |   | (81,625 | ) |   |   | 13,715,079 |   |
| Accumulated other comprehensive loss                              |   |    |      |   |              |        | 93,854 |   |   |   | - |   |   |   | 93,854 |   |
| Deficit                                                           |   |    | (a,b,c,d) |   |              |        | (46,709,395 | ) |   |   | (6,416,557 | ) |   |   | (53,125,952 | ) |
|                                                              |   |    |      |   |              |        | 215,663,763 |   |   |   | (3,064,545 | ) |   |   | 212,599,218 |   |
|                                                              |   |    |      |   |              | $           | 227,922,977 |   |   | $ | (7,517,781 | ) |   | $ | 220,405,196 |   |

----

|                                                                                                                                                                                                                                                                                                            |   |    |   |   | Year Ended December 31, 2010 |       |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------|--------|--------|------------------------------|------------|
|                                                                                                                                                                                                                                                                                                            |   | Note 23 |   |   | CanadianGAAP                 |       |   | Effect of transition to IFRS |   |   | IFRS |   |
|                                                                                                                                                                                                                                                                                                            |   |    |   |   |                         |       |   |   |   |   |   |   |
| Expenses:                                                                                                                                                                                                                                                                                                       |   |    |   |   |                         |       |   |   |   |   |   |   |
| Consulting                                                                                                                                                                                                                                                                                                      |   |    |   |   | $                            | 543,178    |   |   | $ | - |   |   | $ | 543,178 |   |
| DepreciationConsultingGeneral mineral explorationInvestor relationsOfficePart XII.6 tax on flow-throughProfessional feesRentRe-organization costsSalariesStock-based compensation (note 12(b))Transfer agent and regulatory filing feesTravel and accommodationWrite-off of mineral property costs Depreciation |   |    |   |   |                         | 22,698     |   |   |   | - |   |   |   | 22,698 |   |
| General mineral exploration                                                                                                                                                                                                                                                                                     |   |    |   |   |                         | 144,006    |   |   |   | - |   |   |   | 144,006 |   |
| Write-off of mineral property costs                                                                                                                                                                                                                                                                             |   | (a)     |   |   |                         | 21,163,834 |   |   |   | (7,069,956 | )  - |   |   | 14,093,878 |   |
| Insurance                                                                                                                                                                                                                                                                                                       |   |    |   |   |                         | 510,962    |   |   |   |   |   |   |   | 510,962 |   |
| Investor relations                                                                                                                                                                                                                                                                                              |   |    |   |   |                         | 860,454    |   |   |   | - |   |   |   | 860,454 |   |
| Office & rent                                                                                                                                                                                                                                                                                               |   |    |   |   |                         | 245,546    |   |   |   | - |   |   |   | 245,546 |   |
| Option payments received in excess of property costs                                                                                                                                                                                                                                                            |   |    |   |   |                         | (505,865   | ) |   |   | - |   |   |   | (505,865 | ) |
| Professional fees                                                                                                                                                                                                                                                                                               |   |    |   |   |                         | 535,447    |   |   |   | - |   |   |   | 535,447 |   |
| Salaries and benefits                                                                                                                                                                                                                                                                                           |   |    |   |   |                         | 2,605,941  |   |   |   | - |   |   |   | 2,605,941 |   |
| Share-based compensation                                                                                                                                                                                                                                                                                        |   |    | (c,d)  |   |                         |       | 5,585,969 |   |   |   | 226,131 |   |   |   | 5,812,100 |   |
| Transfer agent and regulatory filing fees                                                                                                                                                                                                                                                                       |   |    |   |   |                         |       | 205,857 |   |   |   | - |   |   |   | 205,857 |   |
| Travel and accommodation                                                                                                                                                                                                                                                                                        |   |    |   |   |                         |       | 358,060 |   |   |   | - |   |   |   | 358,060 |   |
|                                                                                                                                                                                                                                                                                                            |   |    |   |   |                         |       |   |   |   |   |   |   |   |   |   |   |
| Loss from operations                                                                                                                                                                                                                                                                                            |   |    |   |   |                         |       | (32,276,087 | ) |   |   | (7,291,650 | ) |   |   | (25,432,262 | ) |
| Interest and other income                                                                                                                                                                                                                                                                                       |   |    |   |   |                         |       | 463,583 |   |   |   | - |   |   |   | 463,583 |   |
| Foreign exchange gains (losses)                                                                                                                                                                                                                                                                                 |   | (a)     |   |   |                         | 727,701    |   |   |   | (724,580 | ) |   |   | 3,121 |   |
| Loss on sale of investments                                                                                                                                                                                                                                                                                     |   |    |   |   |                         |       | (366,418 | ) |   |   | - |   |   |   | (366,418 | ) |
| Other losses                                                                                                                                                                                                                                                                                                    |   |    |   |   |                         |       | (114,449 | ) |   |   |   |   |   |   | (114,449 | ) |
| Loss before income taxes                                                                                                                                                                                                                                                                                        |   |    |   |   |                         |       | (31,565,670 | ) |   |   | 6,843,825 |   |   |   | (25,446,425 | ) |
| Current income tax expense                                                                                                                                                                                                                                                                                      |   |    |   |   |                         |       | (14,751 | ) |   |   | - |   |   |   | (14,751 | ) |
| Deferred income tax/deferred income tax recovery                                                                                                                                                                                                                                                                |   | (a)     |   |   |                         | 7,530,715  |   |   |   | (7,580,260 | ) |   |   | (49,545 | ) |
| Net loss for the year                                                                                                                                                                                                                                                                                           |   |    |   |   |                         | $          | (24,049,706 | ) |   | $ | (1,461,015 | ) |   | $ | (25,510,721 | ) |
|                                                                                                                                                                                                                                                                                                            |   |    |   |   |                         |       |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted loss per common share                                                                                                                                                                                                                                                                         |   |    |   |   |                         | $          | (0.11 | ) |   |   |   |   |   | $ | (0.12 | ) |
| Weighted average number of common shares outstanding                                                                                                                                                                                                                                                            |   |    |   |   |                         |       | 213,523,163 |   |   |   |   |   |   |   | 213,523,163 |   |

----

|                                                                               |   |    |    |   | Year Ended December 31, 2010 |   |
|------------------------------------------------------------------------------------|--------|---------|---------|--------|------------------------------|--------|
|                                                                               |   | Note 23 |    |   | CanadianGAAP                 |   |   | Effect of transition to IFRS |   |   | IFRS |   |
|                                                                               |   |    |    |   |                         |   |   |   |   |   |   |   |
| Net Loss                                                                           |   |    | (a,c,d) |   |                         | $      | (24,049,706 | ) |   | $ | (1,461,015 | ) |   | $ | (25,510,721 | ) |
|                                                                               |   |    |    |   |                         |   |   |   |   |   |   |   |   |   |   |   |
| Fair value adjustment, net of tax, on available for sase.                          |   |    |    |   |                         |   |   |   |   |   |   |   |   |   |   |   |
| sale financial instruments:                                                        |   |    |    |   |                         |   |   |   |   |   |   |   |
| Temporary investments                                                              |   |    |    |   |                         |   | 28,761 |   |   |   | 28,761 |   |
| Other investments and marketable securities                                        |   |    |    |   |                         |   | 370,068 |   |   |   | 370,068 |   |
| Realized losses on marketable securities and other investments reclassified to net |   |    |    |   |                         |   |   |   |   |   |   |   |   |   |   |   |
| other investments reclassified to net income                                       |   |    |    |   |                         |   |   |   |   |   |   |   |   |   |   |   |
| income                                                                             |   |    |    |   |                         |   | 366,418 |   |   |   |   |   |   |   | 366,418 |   |
| Impairment losses on marketable securities                                         |   |    |    |   |                         |   |   |   |   |   |   |   |   |   |   |   |
| and other investments reclassified to net                                          |   |    |    |   |                         |   |   |   |   |   |   |   |   |   |   |   |
| income                                                                             |   |    |    |   |                         |   | 114,449 |   |   |   |   |   |   |   | 114,449 |   |
|  Other comprehensive income                                                   |   |    |    |   |                         |   | 879,696 |   |   |   |   |   |   |   | 879,696 |   |
| Comprehensive loss                                                                 |   |    |    |   |                         | $      | (23,170,010 | ) |   | $ | (1,461,015 | ) |   | $ | (24,631,025 | ) |

----

----