----

| “Michael Lalonde”                                                      Michael LalondePresident and Chief Executive Officer | “Robert Lewis”                                           Robert LewisChief Financial Officer |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| “Michael  Lalonde”                                        Michael LalondePresident and Chief Executive Officer | “Robert Lewis”                                                      Robert LewisChief Financial Officer |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

|                                                  |   |             |        |   |             |   |
|-------------------------------------------------------|--------|------------------|-------------|--------|------------------|--------|
|                                                  |   | December 31 2012 |        |   | December 31 2011 |   |
| Assets                                                |   |             |        |   |             |   |
| Current assets                                        |   |             |        |   |             |   |
| Cash and cash equivalents (note 20)                   |   | $                | 50,789,440  |   |             | $      | 65,870,296 |   |
| Temporary investments (note 6)                        |   |             | 120,491,323 |   |             |   | - |   |
| Marketable securities (note 7)                        |   |             | 712,448     |   |             |   | 4,024,810 |   |
| Accounts receivable                                   |   |             | 1,979,754   |   |             |   | 1,848,207 |   |
| Prepaid expenses and supplier advances                |   |             | 542,871     |   |             |   | 265,702 |   |
|                                                  |   |             | 174,515,836 |   |             |   | 72,009,015 |   |
|                                                  |   |             |        |   |             |   |   |   |
| Restricted cash and deposits (note 8)                 |   |             | 7,398,085   |   |             |   | 1,686,224 |   |
| Property plant and equipment (note 9)                 |   |             | 44,516,031  |   |             |   | 17,847,744 |   |
| Exploration and evaluation assets (note 10)           |   |             | 253,541,535 |   |             |   | 188,590,629 |   |
|                                                  |   | $                | 479,971,487 |   |             | $      | 280,133,612 |   |
| Liabilities                                           |   |             |        |   |             |   |   |   |
| Current liabilities                                   |   |             |        |   |             |   |   |   |
| Accounts payable and accrued liabilities (note 11)    |   | $                | 16,672,833  |   |             | $      | 9,330,709 |   |
| Current portion of finance lease obligation (note 12) |   |             | 236,977     |   |             |   | - |   |
|                                                  |   |             | 16,909,810  |   |             |   | 9,330,709 |   |
| Non-Current liabilities                               |   |             |        |   |             |   |   |   |
| Deferred income taxes (note 15)                       |   |             | 186,272     |   |             |   | 138,886 |   |
| Finance lease obligation (note 12)                    |   |             | 203,066     |   |             |   | - |   |
| Provision for closure and reclamation (note 13)       |   |             | 3,356,749   |   |             |   | 1,923,358 |   |
|                                                  |   |             | 20,655,897  |   |             |   | 11,392,953 |   |
| Equity                                                |   |             |        |   |             |   |   |   |
| Share capital (note 14(a))                            |   |             | 520,916,854 |   |             |   | 327,311,371 |   |
| Share-based payment reserve (note 14(b))              |   |             | 23,472,141  |   |             |   | 17,097,729 |   |
| Accumulated other comprehensive loss                  |   |             | (184,306    | )      |             |   | (1,145,992 | ) |
| Deficit                                               |   |             | (84,889,099 | )      |             |   | (74,522,449 | ) |
|                                                  |   |             | 459,315,590 |   |             |   | 268,740,659 |   |
|                                                  |   | $                | 479,971,487 |   |             | $      | 280,133,612 |   |

| Commitments and Contingency (note 18)Subsequent Event (note 14(b)) |   |                            |
|--------------------------------------------------------------------|--------|---------------------------------|
|                                                               |   |                            |
| Approved by the Board of Directors:                           |   |                            |
| “David Adamson”                                   |   | “Julian Kemp”  |
| David Adamson, Director                                            |   | Julian Kemp, Director           |

----

|                                                                                                                       |   | For the years ended December 31 |        |
|----------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|-------------|
|                                                                                                                       |   | 2012                            |        |   | 2011 |   |
|                                                                                                                       |   |                            |        |   |   |   |
| Expenses                                                                                                                   |   |                            |        |   |   |   |
| Consulting                                                                                                                 |   | $                               | 301,051     |   |   | $ | 332,566 |   |
| Depreciation                                                                                                               |   |                            | 67,281      |   |   |   | 53,933 |   |
| General mineral exploration                                                                                                |   |                            | 15,309      |   |   |   | 156,166 |   |
| Impairment of exploration and evaluation assets (note 10)                                                                  |   |                            | -           |   |   |   | 14,732,137 |   |
| Insurance                                                                                                                  |   |                            | 433,347     |   |   |   | 610,325 |   |
| Investor relations (note 17)                                                                                               |   |                            | 1,210,267   |   |   |   | 955,277 |   |
| Office and rent                                                                                                            |   |                            | 362,877     |   |   |   | 281,454 |   |
| Professional fees                                                                                                          |   |                            | 1,447,186   |   |   |   | 1,392,881 |   |
| Salaries and benefits                                                                                                      |   |                            | 3,928,544   |   |   |   | 2,447,972 |   |
| Share based compensation (note 14(b,c))                                                                                    |   |                            | 4,063,162   |   |   |   | 1,395,365 |   |
| Transfer agent and regulatory filing fees                                                                                  |   |                            | 383,320     |   |   |   | 210,629 |   |
| Travel and accommodation                                                                                                   |   |                            | 311,407     |   |   |   | 175,947 |   |
| Loss before other items                                                                                                    |   |                            | (12,523,751 | ) |   |   | (22,744,652 | ) |
| Interest and other income                                                                                                  |   |                            | 2,234,133   |   |   |   | 477,476 |   |
| Foreign exchange gains (losses)                                                                                            |   |                            | 9,948       |   |   |   | (2,797 | ) |
| Option payments received in excess of property costs (note 10)                                                             |   |                            | 892,465     |   |   |   | 1,054,388 |   |
| Loss on sale of investments                                                                                                |   |                            | (146,022    | ) |   |   | (264,044 | ) |
| Impairment of marketable securities                                                                                        |   |                            | (799,027    | ) |   |   | - |   |
| Other gains                                                                                                                |   |                            | 12,990      |   |   |   | - |   |
| Loss before income taxes                                                                                                   |   |                            | (10,319,264 | ) |   |   | (21,479,629 | ) |
| Current income tax recovery (note 15)                                                                                      |   |                            | -           |   |   |   | 16,838 |   |
| Deferred income tax recovery (expense) (note 15)                                                                           |   |                            | (47,386     | ) |   |   | 66,294 |   |
| Net loss for the year                                                                                                      |   | $                               | (10,366,650 | ) |   | $ | (21,396,497 | ) |
|                                                                                                                       |   |                            |        |   |   |   |   |   |
| Other comprehensive income (loss)                                                                                          |   |                            |        |   |   |   |   |   |
| Fair value adjustment on available for sale financial instruments (net of tax):                                            |   |                            |        |   |   |   |   |   |
| Marketable securities and other investments                                                                                |   |                            | 16,637      |   |   |   | (1,503,890 | ) |
| Realized loss on sales of marketable securities and impairment loss on marketable securities, recycled to net income  |   |                            | 945,049     |   |   |   | 264,044 |   |
| Other comprehensive income (loss) for the period                                                                           |   |                            | 961,686     |   |   |   | (1,239,846 | ) |
| Comprehensive loss                                                                                                         |   | $                               | (9,404,964  | ) |   | $ | (22,636,343 | ) |
| Basic and diluted loss per common share                                                                                    |   | $                               | (0.04       | ) |   | $ | (0.10 | ) |
| Weighted average number of common shares outstanding                                                                       |   |                            | 279,402,156 |   |   |   | 223,992,408 |   |

----

|                                                    |   | Number of Shares |        |   | Share Capital |   |        | Share-based Payments Reserve |   |   | Accumulated OtherComprehensiveIncome/(Loss) |   |   | Deficit |       |   | Total Equity |   |
|---------------------------------------------------------|--------|------------------|-------------|--------|---------------|--------|-------------|------------------------------|--------|--------|---------------------------------------------|--------|--------|---------|------------|--------|--------------|--------|
|                                                    |   |             |        |   | $             |   |        |                         | $      |   |                                        |   | $      |    |       |   | $            |   |   |   | $ |   |   |
| 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 (note 20)           |   |             | 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 |   |
| Shares issued to settle obligation                      |   |             | 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 | ) |
| December 31, 2011                                       |   |             | 237,954,669 |   |          |   | 327,311,371 |                         |   |   | 17,097,729                                  |   |   |    | (1,145,992 | )      |         |   | (74,522,449 | ) |   |   | 268,740,659 |   |

|                                                                                                                 |   | Number of Shares |        |   | Share Capital |   |        | Share-based Payments Reserve |   |   | Accumulated OtherComprehensiveIncome/(Loss) |   |   | Deficit |       |   | Total Equity |   |
|----------------------------------------------------------------------------------------------------------------------|--------|------------------|-------------|--------|---------------|--------|-------------|------------------------------|--------|--------|---------------------------------------------|--------|--------|---------|------------|--------|--------------|--------|
|                                                                                                                 |   |             |        |   | $             |   |        |                         | $      |   |                                        |   | $      |    |       |   | $            |   |   |   | $ |   |   |
| January 1, 2012                                                                                                      |   |             | 237,954,669 |   |          |   | 327,311,371 |                         |   |   | 17,097,729                                  |   |   |    | (1,145,992 | )      |         |   | (74,522,449 | ) |   |   | 268,740,659 |   |
|                                                                                                                 |   |             |        |   |          |   |        |                         |   |   |                                        |   |   |    |       |   |         |   |   |   |   |   |   |   |
| Public offering (note 14 (a))                                                                                        |   |             | 49,000,000  |   |          |   | 200,900,000 |                         |   |   | -                                           |   |   |    | -          |   |         |   | - |   |   |   | 200,900,000 |   |
| Public offering – share issuance costs                                                                         |   |             | -           |   |          |   | (9,027,017  | )                            |   |   | -                                           |   |   |    | -          |   |         |   | - |   |   |   | (9,027,017 | ) |
| Exercise of options                                                                                                  |   |             | 572,500     |   |          |   | 860,300     |                         |   |   | -                                           |   |   |    | -          |   |         |   | - |   |   |   | 860,300 |   |
| Transfer to share capital on exercise of options                                                                     |   |             | -           |   |          |   | 572,200     |                         |   |   | (572,200                                    | )      |   |    | -          |   |         |   | - |   |   |   | - |   |
| Share-based payments - administration                                                                                |   |             | -           |   |          |   | -           |                         |   |   | 4,105,152                                   |   |   |    | -          |   |         |   | - |   |   |   | 4,105,152 |   |
| Share-based payments - property                                                                                      |   |             | -           |   |          |   | -           |                         |   |   | 2,841,460                                   |   |   |    | -          |   |         |   | - |   |   |   | 2,841,460 |   |
| Shares issued to settle obligation                                                                                   |   |             | 78,813      |   |          |   | 300,000     |                         |   |   | -                                           |   |   |    | -          |   |         |   | - |   |   |   | 300,000 |   |
| Unrealized net gain on available-for-sale investments                                                                |   |             | -           |   |          |   | -           |                         |   |   | -                                           |   |   |    | 16,637     |   |         |   | - |   |   |   | 16,637 |   |
| Realized loss on sales of marketable securities and impairment loss on marketable securities, recycled to net income |   |             | -           |   |          |   | -           |                         |   |   | -                                           |   |   |    | 945,049    |   |         |   | - |   |   |   | 945,049 |   |
| Net loss for the year                                                                                                |   |             | -           |   |          |   | -           |                         |   |   | -                                           |   |   |    | -          |   |         |   | (10,366,650 | ) |   |   | (10,366,650 | ) |
| December 31, 2012                                                                                                    |   |             | 287,605,982 |   |          |   | 520,916,854 |                         |   |   | 23,472,141                                  |   |   |    | (184,306   | )      |         |   | (84,889,099 | ) |   |   | 459,315,590 |   |

----

|                                                            |   | For the years ended December 31 |         |
|-----------------------------------------------------------------|--------|---------------------------------|--------------|
|                                                            |   | 2012                            |         |   | 2011 |   |
| Cash provided by (used for):                                    |   |                            |         |   |   |   |
| Operating activities                                            |   |                            |         |   |   |   |
| Net loss                                                        |   | $                               | (10,366,650  | ) |   | $ | (21,396,497 | ) |
| Adjustments for:                                                |   |                            |         |   |   |   |   |   |
| Depreciation                                                    |   |                            | 67,281       |   |   |   | 53,933 |   |
| Impairment of exploration and evaluation expenditures (note 10) |   |                            | -            |   |   |   | 14,732,137 |   |
| Impairment of marketable securities                             |   |                            | 799,027      |   |   |   | - |   |
| Share-based compensation                                        |   |                            | 4,063,162    |   |   |   | 1,395,365 |   |
| Share receipts in excess of property costs                      |   |                            | (519,387     | ) |   |   | (971,994 | ) |
| Interest income                                                 |   |                            | (2,213,929   | ) |   |   | (464,915 | ) |
| Loss on sale of investment                                      |   |                            | 146,022      |   |   |   | 264,044 |   |
| Other losses                                                    |   |                            | 75,031       |   |   |   | 7,128 |   |
| Deferred income tax (recovery) expense                          |   |                            | 47,386       |   |   |   | (66,294 | ) |
| Changes in non-cash working capital:                            |   |                            |         |   |   |   |   |   |
| Accounts receivable and prepaid expenses                        |   |                            | (408,716     | ) |   |   | 287,522 |   |
| Accounts payable and accrued liabilities                        |   |                            | 639,522      |   |   |   | (1,434,301 | ) |
| Interest received                                               |   |                            | 1,174,033    |   |   |   | 557,241 |   |
| Net cash used in operating activities                           |   |                            | (6,497,218   | ) |   |   | (7,036,631 | ) |
|                                                            |   |                            |         |   |   |   |   |   |
| Investing activities                                            |   |                            |         |   |   |   |   |   |
| Temporary investments                                           |   |                            | (119,409,836 | ) |   |   | 52,378,410 |   |
| Exploration and evaluation expenditures                         |   |                            | (55,362,340  | ) |   |   | (43,995,350 | ) |
| Expenditures on property, plant and equipment, net of disposals |   |                            | (24,675,982  | ) |   |   | (13,355,249 | ) |
| Acquisition of marketable securities                            |   |                            | -            |   |   |   | (3,670,015 | ) |
| Proceeds on sale of marketable securities                       |   |                            | 3,843,098    |   |   |   | 366,483 |   |
| Restricted cash & deposits                                  |   |                            | (5,711,861   | ) |   |   | (1,193,224 | ) |
| Net cash used in investing activities                           |   |                            | (201,316,921 | ) |   |   | (9,468,945 | ) |
|                                                            |   |                            |         |   |   |   |   |   |
| Financing activities                                            |   |                            |         |   |   |   |   |   |
| Issuance of  common shares                            |   |                            | 201,760,300  |   |   |   | 70,867,691 |   |
| Share issue costs                                               |   |                            | (9,027,017   | ) |   |   | (459,686 | ) |
| Net cash provided by financing activities                       |   |                            | 192,733,283  |   |   |   | 70,408,005 |   |
|                                                            |   |                            |         |   |   |   |   |   |
| Increase in cash and cash equivalents                           |   |                            | (15,080,856  | ) |   |   | 53,902,429 |   |
| Cash and cash equivalents, beginning of the year                |   |                            | 65,870,296   |   |   |   | 11,967,867 |   |
| Cash and cash equivalents, end of the year                      |   | $                               | 50,789,440   |   |   | $ | 65,870,296 |   |

----

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

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

| a) | Statement of compliance |
|----|-------------------------|

| 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 Minerals Nevada Inc. | British Columbia, Canada |   |               | 100%   |               | Holding company |
| Rubicon Nevada Corp.         | Nevada, United States    |   |               | 100%   |               | Mineral exploration |
| Rubicon Alaska Holdings Inc. | Alaska, United States    |   |               | 100%   |               | Inactive |
| Rubicon Alaska Corp.         | Alaska, United States    |   |               | 100%   |               | Inactive |

----

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

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

| d) | Significant accounting judgments and sources of estimation uncertainty |
|----|------------------------------------------------------------------------|

| e) | Cash and cash equivalents |
|----|---------------------------|

| f) | Temporary investments |
|----|-----------------------|

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

----

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

| Underground operating equipment |   |   | 20 | % |
|---------------------------------|--------|--------|----|---|
| Trucks                          |   |   | 30 | % |
| Buildings/Hoist/Powerlines      |   |   | 5  | % |

| Furniture, fixtures and office equipment |   |   | 20 | % |
|------------------------------------------|--------|--------|----|---|
| Computers                                |   |   | 30 | % |
| Software                                 |   |   | 50 | % |

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

|   | Financial assets at fair value through profit or loss are initially recognized at fair value with changes in fair value recorded through income.  The Company does not currently hold any of this type of financial asset. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.  They are classified as current assets or non-current assets based on their maturity date.  Loans and receivables are initially recognized at fair market value and subsequently carried at amortized cost less any impairment.  Loans and receivables are comprised of cash in the bank, guaranteed investment certificates guaranteed by major Canadian banks and the BC government, provincial treasury bills and notes, temporary investments, reclamation deposits and trade and other 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. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

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

|   | • | 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 |
|----|-----------------------------------------------|

----

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

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

----

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

| 8. |     RESTRICTED CASH AND DEPOSITS |
|----|------------------------------------------------------|

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

|                       |   | Assets under Construction |       |   | Office Equipment |   |      | Mine-site Equipment |   |   | Mine-site Buildings |   |   | Total  |      |
|----------------------------|--------|---------------------------|------------|--------|------------------|--------|-----------|---------------------|--------|--------|---------------------|--------|--------|--------|-----------|
|                       |   | $                         |       |   |             | $      |      |                |   | $      |                |   |   | $      |      |   |   | $ |   |   |
| Cost                       |   |                      |       |   |             |   |      |                |   |   |                |   |   |   |      |   |   |   |   |   |
| Balance, January 1, 2011   |   |                      | 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 |   |
| Additions                  |   |                      | 23,680,117 |   |             |   | 256,699   |                |   |   | 1,138,300           |   |   |   | 3,231,102 |   |   |   | 28,306,218 |   |
| Transfers                  |   |                      | (3,241,160 | )      |             |   | -         |                |   |   | 1,877,513           |   |   |   | 1,363,647 |   |   |   | - |   |
| Disposals                  |   |                      | -          |   |             |   | (3,080    | )                   |   |   | (137,550            | )      |   |   | -         |   |   |   | (140,630 | ) |
| Balance, December 31, 2012 |   |                      | 21,959,661 |   |             |   | 1,386,979 |                |   |   | 18,568,521          |   |   |   | 5,309,033 |   |   |   | 47,224,194 |   |
| Accumulated depreciation   |   |                      |       |   |             |   |      |                |   |   |                |   |   |   |      |   |   |   |   |   |
| Balance, January 1, 2011   |   |                      | -          |   |             |   | 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 |   |
| Depreciation for the year  |   |                      | -          |   |             |   | 263,357   |                |   |   | 823,634             |   |   |   | 475,909   |   |   |   | 1,562,900 |   |
| Disposals                  |   |                      | -          |   |             |   | (616      | )                   |   |   | (64,983             | )      |   |   | -         |   |   |   | (65,599 | ) |
| Balance, December 31, 2012 |   |                      | -          |   |             |   | 855,301   |                |   |   | 1,286,700           |   |   |   | 566,162   |   |   |   | 2,708,163 |   |
| Carrying amounts           |   |                      |       |   |             |   |      |                |   |   |                |   |   |   |      |   |   |   |   |   |
| December 31, 2011          |   |                      | 1,520,704  |   |             |   | 540,800   |                |   |   | 15,162,209          |   |   |   | 624,031   |   |   |   | 17,847,744 |   |
| December 31, 2012          |   |                      | 21,959,661 |   |             |   | 531,678   |                |   |   | 17,281,821          |   |   |   | 4,742,871 |   |   |   | 44,516,031 |   |

----

| 10. |     EXPLORATION AND EVALUATION ASSETS |
|-----|-----------------------------------------------------------|

|                                  |   | Phoenix Gold ProjectRed Lake Ontario |        |   | Other Red Lake Properties Ontario |   |      | Alaska Properties USA |   |   | Nevada Properties USA |   |   | Total  |      |
|---------------------------------------|--------|--------------------------------------|-------------|--------|-----------------------------------|--------|-----------|-----------------------|--------|--------|-----------------------|--------|--------|--------|-----------|
|                                  |   | $                                    |        |   |                              | $      |      |                  |   | $      |                  |   |   | $      |      |   |   | $ |   |   |
| Balance,  January 1, 2011   |   |                                 | 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 |   |
| Costs incurred in the year            |   |                                 | 64,889,569  |   |                              |   | 61,337    |                  |   |   | -                     |   |   |   | -         |   |   |   | 64,950,906 |   |
| Balance, December 31, 2012            |   |                                 | 237,609,481 |   |                              |   | 8,815,117 |                  |   |   | -                     |   |   |   | 7,116,937 |   |   |   | 253,541,535 |   |

|   | (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 |
| Brodie                |   |     | 100%    |        | 2 patented mining claims     | Bateman township |
| DMC                   |   |     | 100%    |        | 130 unpatented mining claims | Dome, McDonough, Bateman and Fairlie townships |
| East Bay              |   |     | 100%    |        | 43 unpatented mining claims  | Bateman and Black Bear townships |
| Humlin                |   |     | 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 |
| Schlasinger           |   |     | 100%    |        | 4 patented mining claims     | Bateman township |
| Slate Bay             |   |     | 100%    |        | 30 unpatented mining claims  | McDonough, Dome and Graves townships |
| West End              |   |     | 100%    |        | 3 unpatented claims          | Todd township |
| 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 |

----

| 11. |     TRADE AND OTHER PAYABLES |
|-----|--------------------------------------------------|

|                                |   | December 31 2012 |       |   | December 31 2011 |   |
|-------------------------------------|--------|------------------|------------|--------|------------------|--------|
| Trade payables                      |   | $                | 3,857,922  |   |             | $      | 3,094,756 |   |
| Construction holdbacks              |   |             | 2,157,198  |   |             |   | 1,113,760 |   |
| Payables to related party (note 17) |   |             | 100,000    |   |             |   | 70,000 |   |
| Compensation payable                |   |             | 1,922,755  |   |             |   | 1,218,703 |   |
| Accrued liabilities                 |   |             | 8,629,984  |   |             |   | 3,194,068 |   |
| Other                               |   |             | 4,974      |   |             |   | 639,422 |   |
| Total                               |   | $                | 16,672,833 |   |             | $      | 9,330,709 |   |

| 12. |     FINANCE LEASE OBLIGATION |
|-----|--------------------------------------------------|

|                                |   | Less than 1 year |    |   | More than 1 year |   |    | Total  |   |
|-------------------------------------|--------|------------------|---------|--------|------------------|--------|---------|--------|--------|
| Total future minimum lease payments |   | $                | 280,392 |   |             | $      | 213,562 |   |   | $ | 493,954 |   |
| Less amount representing interest   |   |             | (43,415 | )      |             |   | (10,496 | )      |   |   | (53,911 | ) |
| Finance lease obligation            |   | $                | 236,977 |   |             | $      | 203,066 |   |   | $ | 440,043 |   |

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

----

| 13. |     PROVISION FOR CLOSURE AND RECLAMATION (continued) |
|-----|---------------------------------------------------------------------------|

| Balance January 1, 2011    |   | $      | 394,392   |   |
|----------------------------|--------|--------|-----------|--------|
| Accretion                  |   |   | 20,158    |   |
| Revision of estimate       |   |   | 1,508,808 |   |
| Balance December, 31, 2011 |   |   | 1,923,358 |   |
| Accretion                  |   |   | 36,304    |   |
| Revision of estimate       |   |   | 1,397,087 |   |
| Balance December 31, 2012  |   | $      | 3,356,749 |   |

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

| (a) | Share capital |
|-----|---------------|

|   (b) |   | Stock Options |
|------------|--------|---------------|

|                         |   | 2012             |       |   | 2011                            |   |
|------------------------------|--------|------------------|------------|--------|---------------------------------|--------|
|                         |   | Number of Shares |       |   | Weighted Average Exercise Price |   |   | Number of Shares |   |   | Weighted Average Exercise Price |   |
|                         |   |             |       |   |                            |   |   | $ |   |   |   | $ |   |   |
| Balance at beginning of year |   |             | 9,895,996  |   |                            |   | 3.84 |   |   |   | 7,578,000 |   |   |   | 2.82 |   |
| Granted                      |   |             | 5,272,230  |   |                            |   | 3.61 |   |   |   | 3,431,696 |   |   |   | 5.72 |   |
| Exercised(1)                 |   |             | (572,500   | )      |                            |   | 1.50 |   |   |   | (719,000 | ) |   |   | 1.21 |   |
| Forfeited/expired            |   |             | (779,900   | )      |                            |   | 4.78 |   |   |   | (394,700 | ) |   |   | 5.27 |   |
| Outstanding at end of year   |   |             | 13,815,826 |   |                            |   | 3.80 |   |   |   | 9,895,996 |   |   |   | 3.84 |   |
| Exercisable at end of year   |   |             | 9,725,211  |   |                            |   | 3.87 |   |   |   | 8,355,498 |   |   |   | 3.49 |   |

----

| December 31, 2012   |         |   |               |       |      |                   |   |   |                  |   |
|---------------------|--------------|--------|--------------------|------------|-----------|------------------------|--------|--------|-----------------------|--------|
| Option Price Range  |         |   | Number Outstanding |       |      | Weighted Average Price |   |   | Weighted Average Life |   |
|                |         |   |               |       |      | $                      |   |   |                  | Years  |   |
| $                   | 0.76 - $1.04 |   |               |       | 917,500   |                   |   |   | 1.02                  |   |   |   | 0.14 |   |
| $                   | 1.31 - $1.46 |   |               |       | 1,930,000 |                   |   |   | 1.31                  |   |   |   | 1.00 |   |
| $                   | 1.89 - $3.63 |   |               |       | 2,430,000 |                   |   |   | 2.93                  |   |   |   | 3.79 |   |
| $                   | 3.96 - $4.53 |   |               |       | 3,538,230 |                   |   |   | 4.02                  |   |   |   | 3.76 |   |
| $                   | 5.22         |   |               |       | 2,310,000 |                   |   |   | 5.22                  |   |   |   | 2.03 |   |
| $                   | 5.80         |   |               |       | 2,690,096 |                   |   |   | 5.80                  |   |   |   | 2.72 |   |
| Total Stock Options |         |   |               | 13,815,826 |      |                   |   | 3.80   |                  |   |   | 2.65 |   |

|                            |   | 2012      |   |   | 2011      |   |
|---------------------------------|--------|-----------|--------|--------|-----------|--------|
| Weighted average share price    |   | $         | 3.61   |   |      | $      | 3.56 |   |
| Weighted average exercise price |   | $         | 3.61   |   |      | $      | 5.72 |   |
| Risk-free interest rate         |   |      | 1.08   | %      |      |   | 1.86 | % |
| Expected life                   |   | 3.6 Years |   |   | 2.9 Years |   |
| Expected volatility             |   |      | 60     | %      |      |   | 63 | % |
| Expected dividend yield         |   |      | 0      | %      |      |   | 0 | % |

----

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

|                                 |   | Year EndedDecember 31, 2012 |    |   | Year EndedDecember 31, 2011    |   |
|--------------------------------------|--------|-----------------------------|---------|--------|--------------------------------|--------|
|                                 |   | Number of SARS              |    |   | Weighted AverageExercise Price |   |   | Number ofSARS |   |   | Weighted AverageExercise Price |   |
|                                 |   |                        |    |   |                           |   |   | $ |   |   |   | $ |   |   |
| Balance at the beginning of the year |   |                        | 290,000 |   |                           |   | 4.09 |   |   |   | 190,000 |   |   |   | 3.75 |   |
| Granted                              |   |                        | 200,000 |   |                           |   | 3.23 |   |   |   | 200,000 |   |   |   | 4.18 |   |
| Exercised                            |   |                        | (50,000 | )      |                           |   | 3.88 |   |   |   | - |   |   |   | - |   |
| Converted to stock options           |   |                        | (40,000 | )      |                           |   | 3.88 |   |   |   | (100,000 | ) |   |   | 3.63 |   |
| Outstanding, end of the year         |   |                        | 400,000 |   |                           |   | 3.71 |   |   |   | 290,000 |   |   |   | 4.09 |   |
| Exercisable, end of the year         |   |                        | 200,000 |   |                           |   | 4.18 |   |   |   | 45,000 |   |   |   | 3.88 |   |

|   | (d) | Performance Stock Options |
|--------|-----|---------------------------|

----

| 15. |     INCOME TAXES  |
|-----|--------------------------------------------|

|                                                              |   | 2012   |       |   | 2011   |   |
|-------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
|                                                              |   | $      |       |   |   | $      |   |   |
| Net loss for the year, before taxes                               |   |   | (9,884,546 | )      |   |   | (21,479,629 | ) |
| Blended statutory tax rate                                        |   |   | 26.5       | %      |   |   | 29.2 | % |
| Expected income tax recovery                                      |   |   | 2,619,405  |   |   |   | 6,276,276 |   |
| Net adjustment for current, deductible and non-deductible amounts |   |   | (1,183,825 | )      |   |   | (3,934,165 | ) |
| Unrecognized benefit of non-capital losses                        |   |   | (1,482,966 | )      |   |   | (2,258,979 | ) |
| Income tax recovery (expense), net                                |   |   | (47,386    | )      |   |   | 83,132 |   |

|                                                           |   | 2012   |       |   | 2011   |   |
|----------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
|                                                           |   | $      |       |   |   | $      |   |   |
| Deferred income tax assets recognized:                         |   |   |       |   |   |   |   |   |
| Tax loss Carry-forwards                                        |   |   | 1,718,528  |   |   |   | 6,819,228 |   |
| Equipment and intangible tax pools in excess of carrying value |   |   | 779,986    |   |   |   | 534,669 |   |
| Share issue costs and other                                    |   |   | 3,581,743  |   |   |   | 912,952 |   |
| Deferred income tax assets recognized                          |   |   | 6,080,257  |   |   |   | 8,272,849 |   |
|                                                           |   |   |       |   |   |   |   |   |
| Deferred income tax liabilities recognized:                    |   |   |       |   |   |   |   |   |
| Net mineral property carrying amounts in excess of tax pools   |   |   | (6,266,529 | )      |   |   | (8,411,735 | ) |
| Deferred income tax liabilities recognized                     |   |   | (6,266,529 | )      |   |   | (8,411,735 | ) |
|                                                           |   |   |       |   |   |   |   |   |
| Net deferred income tax liability recognized                   |   |   | (186,272   | )      |   |   | (138,886 | ) |
|                                                           |   |   |       |   |   |   |   |   |
| Deferred income tax assets not recognized:                     |   |   |       |   |   |   |   |   |
| Tax loss carry-forwards                                        |   |   | 7,265,805  |   |   |   | 4,209,286 |   |
| Total unrecognized deferred income tax asset                   |   |   | 7,265,805  |   |   |   | 4,209,286 |   |

| 16. |     RELATED PARTY TRANSACTIONS |
|-----|----------------------------------------------------|

| Compensation                 |   | 2012   |      |   | 2011   |   |
|------------------------------|--------|--------|-----------|--------|--------|--------|
|                         |   | $      |      |   |   | $      |   |   |
| Short-term employee benefits |   |   | 3,642,942 |   |   |   | 4,172,091 |   |
| Share-based payments         |   |   | 4,405,946 |   |   |   | 1,196,229 |   |
|                         |   |   | 8,048,888 |   |   |   | 5,368,320 |   |

----

| 17. |     INVESTOR RELATIONS |
|-----|--------------------------------------------|

|                       |   | 2012   |      |   | 2011   |   |
|----------------------------|--------|--------|-----------|--------|--------|--------|
|                       |   | $      |      |   |   | $      |   |   |
| Salaries & benefits    |   |   | 850,345   |   |   |   | 423,718 |   |
| Travel & accommodation |   |   | 106,165   |   |   |   | 148,633 |   |
| Shareholder communication  |   |   | 129,768   |   |   |   | 209,312 |   |
| Other                      |   |   | 123,989   |   |   |   | 173,614 |   |
| Total                      |   |   | 1,210,267 |   |   |   | 955,277 |   |

| 18. |     COMMITMENTS AND CONTINGENCY |
|-----|-----------------------------------------------------|

|   | (a) | At December 31, 2012, 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 2012 |       |   | December 31 2011 |   |
|-----------------------|--------|------------------|------------|--------|------------------|--------|
| Less than 1 year      |   | $                | 12,048,838 |   |             | $      | 315,247 |   |
| Between 1 and 2 years |   |             | 73,315     |   |             |   | 162,114 |   |
| Total                 |   | $                | 12,122,153 |   |             | $      | 477,361 |   |

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

|   | (c) | On December 12, 2012, the Company noted that it had been named in a petition brought by Wabauskang First Nation for judicial review focused on the Province of Ontario’s authority to approve a production closure plan and challenging the discharge of the duty to consult.  The Company intends to vigorously defend its consultation record and the petition which it believes to be without merit. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 19. |     SEGMENTED INFORMATION |
|-----|-----------------------------------------------|

----

| 20. |     SUPPLEMENTAL CASH FLOW AND NON-CASH ACTIVITIES |
|-----|------------------------------------------------------------------------|

|                                                                                                                    |   | December 31 2012 |       |   | December 31 2011 |   |
|-------------------------------------------------------------------------------------------------------------------------|--------|-----------------------|------------|--------|-----------------------|--------|
| Cash                                                                                                                    |   | $                     | 6,806,331  |   |                  | $      | 1,135,218 |   |
| Government of Canada treasury bills, provincial government promissory notes and bank guaranteed investment certificates |   |                  | 43,983,109 |   |                  |   | 64,735,077 |   |
|                                                                                                                    |   | $                     | 50,789,440 |   |                  | $      | 65,870,295 |   |

----

----