----

----

----

----

----

----

| Vancouver, B.C.   |  "D&H Group LLP"   |
|-------------------|-----------------------------|
| December 22, 2011 |  Chartered Accountants |

----

|                                                                    |   |   | 2011$      |   |   |   | 2010$      |   |
|-------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|
| A S S E T S                                                             |   |
|                                                                    |   |   |       |   |   |   |       |   |
| CURRENT ASSETS                                                          |   |   |       |   |   |   |       |   |
| Cash and cash equivalents                                               |   |   | 5,012,487  |   |   |   | 2,894,385  |   |
| Short-term investments (Note 4)                                         |   |   | 10,204,609 |   |   |   | 1,705,318  |   |
| Amounts receivable                                                      |   |   | 71,461     |   |   |   | 51,636     |   |
| Prepaids                                                                |   |   | 54,165     |   |   |   | 35,993     |   |
|                                                                    |   |   | 15,342,722 |   |   |   | 4,687,332  |   |
| CAPITAL ASSETS, net of accumulated depreciation of $7,040 (2010 - $808) |   |   | 128,654    |   |   |   | 25,526     |   |
| INVESTMENTS (Note 5)                                                    |   |   | 332,144    |   |   |   | 78,194     |   |
| RESOURCE INTERESTS (Note 6)                                             |   |   | 79,176     |   |   |   | 36,145     |   |
| BOND DEPOSIT                                                            |   |   | 3,292      |   |   |   | 3,292      |   |
|                                                                    |   |   | 15,885,988 |   |   |   | 4,830,489  |   |
| L I A B I L I T I E S                                                   |   |
|                                                                    |   |
| CURRENT LIABILITIES                                                     |   |   |       |   |   |   |       |   |
| Accounts payable and accrued liabilities                                |   |   | 381,479    |   |   |   | 135,972    |   |
| S H A R E H O L D E R S ’ E Q U I T Y                        |   |
|                                                                    |   |
| SHARE CAPITAL (Note 8)                                                  |   |   | 18,888,813 |   |   |   | 5,757,155  |   |
| CONTRIBUTED SURPLUS (Note 10)                                           |   |   | 4,837,912  |   |   |   | 613,782    |   |
| DEFICIT                                                                 |   |   | (8,390,790 | )      |   |   | (1,668,498 | )      |
| ACCUMULATED OTHER COMPREHENSIVE GAIN (LOSS)                             |   |   | 168,574    |   |   |   | (7,922     | )      |
|                                                                    |   |   | 15,504,509 |   |   |   | 4,694,517  |   |
|                                                                    |   |   | 15,885,988 |   |   |   | 4,830,489  |   |

| /s/ Mark Saxon  |  , Director |
|-----------------|------------------|
| /s/ Mike Hudson |  , Director |

----

|                                                                                                 |   |   | 2011$      |    |   |   | 2010$      |    |   |   | 2009$      |    |
|------------------------------------------------------------------------------------------------------|--------|--------|------------|---------|--------|--------|------------|---------|--------|--------|------------|---------|
| MINERAL EXPLORATION COSTS (Note 7)                                                                   |   |   | 1,570,435  |    |   |   | 654,521    |    |   |   | 11,588     |    |
| EXPENSES                                                                                             |   |   |       |    |   |   |       |    |   |   |       |    |
| Accounting and administration                                                                        |   |   | 80,375     |    |   |   | 54,850     |    |   |   | 6,000      |    |
| Audit                                                                                                |   |   | 67,903     |    |   |   | 46,913     |    |   |   | 2,847      |    |
| Corporate development                                                                                |   |   | 268,638    |    |   |   | 56,226     |    |   |   | -          |    |
| Corporate finance fee                                                                                |   |   | -          |    |   |   | 20,000     |    |   |   | -          |    |
| Depreciation                                                                                         |   |   | 7,040      |    |   |   | 808        |    |   |   | -          |    |
| General exploration                                                                                  |   |   | 113,780    |    |   |   | 54,893     |    |   |   | 9,383      |    |
| Investor relations                                                                                   |   |   | 41,500     |    |   |   | 35,500     |    |   |   | -          |    |
| Legal                                                                                                |   |   | 86,530     |    |   |   | 32,419     |    |   |   | 20,853     |    |
| Management fees                                                                                      |   |   | 158,250    |    |   |   | 97,500     |    |   |   | -          |    |
| Office                                                                                               |   |   | 84,659     |    |   |   | 54,812     |    |   |   | 626        |    |
| Professional fees                                                                                    |   |   | 221,770    |    |   |   | 93,719     |    |   |   | 1,852      |    |
| Regulatory fees                                                                                      |   |   | 35,278     |    |   |   | 18,429     |    |   |   | -          |    |
| Rent                                                                                                 |   |   | 4,800      |    |   |   | 4,000      |    |   |   | -          |    |
| Salaries and benefits                                                                                |   |   | 116,028    |    |   |   | -          |    |   |   | -          |    |
| Shareholder costs                                                                                    |   |   | 18,268     |    |   |   | 9,927      |    |   |   | -          |    |
| Stock-based compensation (Note 9)                                                                    |   |   | 4,437,538  |    |   |   | 340,750    |    |   |   | -          |    |
| Transfer agent                                                                                       |   |   | 31,573     |    |   |   | 19,645     |    |   |   | -          |    |
| Travel                                                                                               |   |   | 177,338    |    |   |   | 66,798     |    |   |   | -          |    |
|                                                                                                 |   |   | 5,951,268  |    |   |   | 1,007,189  |    |   |   | 41,561     |    |
| LOSS BEFORE OTHER ITEMS                                                                              |   |   | (7,521,703 | )       |   |   | (1,661,710 | )       |   |   | (53,149    | )       |
| OTHER ITEMS                                                                                          |   |   |       |    |   |   |       |    |   |   |       |    |
| Gain on disposal of capital asset                                                                    |   |   | 3,683      |    |   |   | -          |    |   |   | -          |    |
| Gain on sale of investment (Note 5(b))                                                               |   |   | 565,978    |    |   |   | -          |    |   |   | -          |    |
| Write-off of resource interest (Note 6(a))                                                           |   |   | (9,142     | )       |   |   | -          |    |   |   | -          |    |
| Gain on option of resource interests (Note 6(b))                                                     |   |   | 112,961    |    |   |   | 81,462     |    |   |   | -          |    |
| Interest income                                                                                      |   |   | 135,783    |    |   |   | 17,950     |    |   |   | -          |    |
| Foreign exchange                                                                                     |   |   | (37,598    | )       |   |   | 9,146      |    |   |   | 743        |    |
|                                                                                                 |   |   | 771,665    |    |   |   | 108,558    |    |   |   | 743        |    |
| LOSS BEFORE INCOME TAXES                                                                             |   |   | (6,750,038 | )       |   |   | (1,553,152 | )       |   |   | (52,406    | )       |
| FUTURE INCOME TAX RECOVERY (Note 12)                                                                 |   |   | 27,746     |    |   |   | -          |    |   |   | -          |    |
| NET LOSS FOR THE YEAR                                                                                |   |   | (6,722,292 | )       |   |   | (1,553,152 | )       |   |   | (52,406    | )       |
| OTHER COMPREHENSIVE GAIN (LOSS)                                                                      |   |   | 176,496    |    |   |   | (7,922     | )       |   |   | -          |    |
| COMPREHENSIVE LOSS FOR THE YEAR                                                                      |   |   | (6,545,796 | )       |   |   | (1,561,074 | )       |   |   | (52,406    | )       |
| LOSS PER COMMON SHARE- BASIC AND DILUTED                                                             |   |   | (0.12      | )  |   |   | (0.04      | )  |   |   | (0.00      | )  |
| WEIGHTED AVERAGE NUMBER OF COMMON     SHARES OUTSTANDING- BASIC AND DILUTED |   |   | 54,884,348 |    |   |   | 34,701,602 |    |   |   | 10,500,000 |    |

----

|                                                                                                                                                                                                                     |   |   | 2011$      |   |   |   | 2010$      |   |   |   | 2009$    |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|--------|----------|--------|
| DEFICIT - BEGINNING OF YEAR                                                                                                                                                                                              |   |   | (1,668,498 | )      |   |   | (115,346   | )      |   |   | (62,940  | )      |
| NET LOSS FOR THE YEAR                                                                                                                                                                                                    |   |   | (6,722,292 | )      |   |   | (1,553,152 | )      |   |   | (52,406  | )      |
| DEFICIT - END OF YEAR                                                                                                                                                                                                    |   |   | (8,390,790 | )      |   |   | (1,668,498 | )      |   |   | (115,346 | )      |
| ACCUMULATED OTHERCOMPREHENSIVE LOSS     - BEGINNING OF YEAR                                                                                                                                     |   |   | (7,922     | )      |   |   | -          |   |   |   | -        |   |
| NET CHANGE IN FAIR VALUE OF AVAILABLE-FOR     -SALE INVESTMENTS, net of $128,623 future            income tax expense (2010 - $nil) |   |   | 818,182    |   |   |   | (7,922     | )      |   |   | -        |   |
| RECLASSIFICATION OF ADJUSTMENT ON SALE     OF AVAILABLE-FOR-SALE INVESTMENTS, net of            $100,877 future income tax recovery |   |   | (641,686   | )      |   |   | -          |   |   |   | -        |   |
| ACCUMULATED OTHERCOMPREHENSIVE     GAIN (LOSS) - END OF YEAR                                                                                                                                    |   |   | 168,574    |   |   |   | (7,922     | )      |   |   | -        |   |

----

|                                                                                          |   |   | 2011$      |   |   |   | 2010$      |   |   |   | 2009$   |   |
|-----------------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|--------|---------|--------|
| CASH PROVIDED FROM (USED FOR)                                                                 |   |   |       |   |   |   |       |   |   |   |    |   |
| OPERATING ACTIVITIES                                                                          |   |   |       |   |   |   |       |   |   |   |    |   |
| Net loss for the year                                                                         |   |   | (6,722,292 | )      |   |   | (1,553,152 | )      |   |   | (52,406 | )      |
| Adjustment for items not involving cash                                                       |   |   |       |   |   |   |       |   |   |   |    |   |
|      Depreciation                                                    |   |   | 7,040      |   |   |   | 808        |   |   |   | -       |   |
|      Stock-based compensation                                        |   |   | 4,437,538  |   |   |   | 340,750    |   |   |   | -       |   |
|      Gain on sale of investment                                      |   |   | (565,978   | )      |   |   | -          |   |   |   | -       |   |
|      Write-off of resource interest                                  |   |   | 9,142      |   |   |   | -          |   |   |   | -       |   |
|      Gain on disposal of capital asset                               |   |   | (3,683     | )      |   |   | -          |   |   |   | -       |   |
|      Gain on option of resource interests                            |   |   | (112,961   | )      |   |   | (81,462    | )      |   |   | -       |   |
|      Future income tax recovery                                      |   |   | (27,746    | )      |   |   | -          |   |   |   | -       |   |
|                                                                                          |   |   | (2,978,940 | )      |   |   | (1,293,056 | )      |   |   | (52,406 | )      |
| Increase in amounts receivable                                                                |   |   | (19,825    | )      |   |   | (48,618    | )      |   |   | (259    | )      |
| Increase in prepaids                                                                          |   |   | (18,172    | )      |   |   | (35,993    | )      |   |   | -       |   |
| Increase in accounts payable and accrued liabilities                                          |   |   | 245,507    |   |   |   | 116,470    |   |   |   | 26,785  |   |
|                                                                                          |   |   | (2,771,430 | )      |   |   | (1,261,197 | )      |   |   | (25,880 | )      |
| FINANCING ACTIVITIES                                                                          |   |   |       |   |   |   |       |   |   |   |    |   |
| Issuance of common shares                                                                     |   |   | 13,144,515 |   |   |   | 5,840,460  |   |   |   | -       |   |
| Share issue costs                                                                             |   |   | (226,265   | )      |   |   | (267,905   | )      |   |   | -       |   |
| Advances                                                                                      |   |   | -          |   |   |   | -          |   |   |   | 18,000  |   |
| Repayment of advances                                                                         |   |   | -          |   |   |   | (88,000    | )      |   |   | -       |   |
| Cash from amalgamation                                                                        |   |   | -          |   |   |   | 393,802    |   |   |   | -       |   |
| Contributed surplus                                                                           |   |   | -          |   |   |   | -          |   |   |   | 9,140   |   |
|                                                                                          |   |   | 12,918,250 |   |   |   | 5,878,357  |   |   |   | 27,140  |   |
| INVESTING ACTIVITIES                                                                          |   |   |       |   |   |   |       |   |   |   |    |   |
| Additions to resource interests                                                               |   |   | (56,370    | )      |   |   | (28,811    | )      |   |   | (14,367 | )      |
| Additions to capital assets                                                                   |   |   | (135,692   | )      |   |   | (26,334    | )      |   |   | -       |   |
| Proceeds from disposal of capital asset                                                       |   |   | 29,207     |   |   |   | -          |   |   |   | -       |   |
| Proceeds from sale of investment                                                              |   |   | 605,978    |   |   |   | -          |   |   |   | -       |   |
| Proceeds from option of resource interests                                                    |   |   | 27,450     |   |   |   | 28,705     |   |   |   | -       |   |
| Short-term investments                                                                        |   |   | (8,499,291 | )      |   |   | (1,705,318 | )      |   |   | -       |   |
|                                                                                          |   |   | (8,028,718 | )      |   |   | (1,731,758 | )      |   |   | (14,367 | )      |
| INCREASE (DECREASE) IN CASH AND     CASH EQUIVALENTS DURING THE YEAR |   |   | 2,118,102  |   |   |   | 2,885,402  |   |   |   | (13,107 | )      |
| CASH AND CASH EQUIVALENTS     - BEGINNING OF YEAR                    |   |   | 2,894,385  |   |   |   | 8,983      |   |   |   | 22,090  |   |
| CASH AND CASH EQUIVALENTS     - END OF YEAR                          |   |   | 5,012,487  |   |   |   | 2,894,385  |   |   |   | 8,983   |   |
| CASH AND CASH EQUIVALENTS COMPRISES:                                                          |   |   |       |   |   |   |       |   |   |   |    |   |
| Cash                                                                                          |   |   | 5,012,487  |   |   |   | 2,394,207  |   |   |   | 8,983   |   |
| Short-term deposit                                                                            |   |   | -          |   |   |   | 500,178    |   |   |   | -       |   |
|                                                                                          |   |   | 5,012,487  |   |   |   | 2,894,385  |   |   |   | 8,983   |   |

----

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

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

----

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

----

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

----

----

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

|   | Level 2 - | inputs other than quoted prices that are observable for the asset or liabilityeither directly or indirectly; and |
|--------|-----------|------------------------------------------------------------------------------------------------------------------|

|   | Level 3 - | inputs that are not based on observable market data. |
|--------|-----------|------------------------------------------------------|

----

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

| 3. | RECAPITALIZATION AND AMALGAMATION |
|----|-----------------------------------|

|   | (i) | 10,500,000 common shares to the Tasman shareholders, on an exchange ratio of one common share for each Tasman common share issued and outstanding; |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | 7,150,000 common shares to the Ausex shareholders, on an exchange ratio of one common share for each Ausex common share issued and outstanding; and |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | 5,046,402 common shares to the Lumex shareholders, on an exchange ratio of 1.0806 common shares for each Lumex share issued and outstanding. |
|--------|-------|----------------------------------------------------------------------------------------------------------------------------------------------|

|   | (i) | Tasman was deemed to be the parent company for accounting purposes.  Accordingly, its net assets were included in the consolidated balance sheets at their historical book values; and |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 3. | RECAPITALIZATION AND AMALGAMATION (continued) |
|----|-----------------------------------------------|

|   | (ii) | control of the net assets of Ausex and Lumex was acquired on the Effective Date.  The transaction was accounted for as a purchase of the assets and liabilities of Ausex and Lumex by Tasman.  The assets and liabilities of Ausex and Lumex were recorded at their fair values, as follows: |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                            |   |   | $       |   |
|-------------------------------------------------|--------|--------|---------|--------|
| Cash                                            |   |   | 393,802 |   |
| Amounts receivable                              |   |   | 6,123   |   |
| Advances from Ausex, eliminated on Amalgamation |   |   | 36,876  |   |
| Amounts payable and accrued liabilities         |   |   | (8,478  | )      |
| Net assets acquired                             |   |   | 428,323 |   |

| 4. | SHORT-TERM INVESTMENTS |
|----|------------------------|

|                                                                                                                |   |   | 2011$      |   |   |   | 2010$     |   |
|---------------------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|-----------|--------|
| Redeemable GICs                                                                                                     |   |   |       |   |   |   |      |   |
| Due November 21, 2011 at cost plus accrued interest     at 1.40% per annum                 |   |   | 508,499    |   |   |   | -         |   |
| Due November 29, 2011 at cost plus accrued interest     at Prime Rate less 1.80% per annum |   |   | 6,558,767  |   |   |   | -         |   |
| Due April 23, 2012 at cost plus accrued interest     at 1.40% per annum                    |   |   | 806,744    |   |   |   | -         |   |
| Due January 10, 2012 at cost plus accrued interest     at 1.32% per annum                  |   |   | 1,720,375  |   |   |   | -         |   |
| Due March 26, 2012 at cost plus accrued interest     at 1.20% per annum                    |   |   | 610,224    |   |   |   | -         |   |
| Due July 11, 2011 at cost plus accrued interest     at Prime Rate less 1.80% per annum     |   |   | -          |   |   |   | 400,644   |   |
| Due July 12, 2011 at cost plus accrued interest     at 1.00% per annum                     |   |   | -          |   |   |   | 502,688   |   |
| Due August 15, 2011 at cost plus accrued interest     at 0.90% per annum                   |   |   | -          |   |   |   | 801,986   |   |
|                                                                                                                |   |   | 10,204,609 |   |   |   | 1,705,318 |   |

----

| 5. | INVESTMENTS |
|----|-------------|

|                                                         | 2011         |
|--------------------------------------------------------------|--------------|
|                                                         | Number  |   | Cost$ |   | AccumulatedCompre-hensiveGain$ |   | Carrying Value$ |
| Common shares                                                |         |   |   |   |   |   |   |
|      Scandinavian Resources Limited | 882,353      |   | 135,824 |   | 196,320 |   | 332,144 |

|                                                         | 2010         |
|--------------------------------------------------------------|--------------|
|                                                         | Number  |   | Cost$ |   | AccumulatedCompre-hensiveLoss$ |   | Carrying Value$ |
| Common shares                                                |         |   |   |   |   |   |   |
|      Scandinavian Resources Limited | 588,235      |   | 86,116 |   | (7,922) |   | 78,194 |

|   | (a) | The Company has received common shares of Scandinavian Resources Limited (“Scandinavian”), a public company listed on the Australian Stock Exchange, from the option of certain of its iron ore properties, as described in Note 6(b).  As at August 31, 2011 the quoted market value of the Scandinavian shares was $332,144. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | In July 2010 the Company completed the sale of certain of its iron ore licenses in Sweden and received 691,921 common shares of Beowulf Mining PLC (“Beowulf”), a public company listed on the London Stock Exchange, at an ascribed value of $40,000.  The Company subsequently sold the Beowulf shares for $605,978 resulting in a realized gain of $565,978.  See also Note 6(b). |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6. | RESOURCE INTERESTS |
|----|--------------------|

|                                          |   | Acquisition Costs |   |
|-----------------------------------------------|--------|-------------------|--------|
|                                          |   |              | 2011$  |   |   |   | 2010$ |   |
| Rare Earth Element Properties                 |   |              |   |   |   |   |   |   |
|      Norra Kärr |   |              | 16,078 |   |   |   | 1,731 |   |
|      Otanmaki        |   |              | 801    |   |   |   | 801 |   |
|      Bastnäs    |   |              | -      |   |   |   | 9,142 |   |
|      Other           |   |              | 62,297 |   |   |   | 20,274 |   |
|                                          |   |              | 79,176 |   |   |   | 31,948 |   |
| Iron Ore Properties                           |   |              |   |   |   |   |   |   |
|      Other           |   |              | -      |   |   |   | 4,197 |   |
|                                          |   |              | 79,176 |   |   |   | 36,145 |   |

----

| 6. | RESOURCE INTERESTS (continued) |
|----|--------------------------------|

|   | (a) | Rare Earth Element Properties |
|--------|-----|-------------------------------|

|   | (i) | 14 exploration claims or claim applications in Sweden; |
|--------|-----|--------------------------------------------------------|

|   | (ii) | 119 exploration claims or claim applications in Finland; and |
|--------|------|--------------------------------------------------------------|

|   | (iii) | 7 exploration claims in Norway. |
|--------|-------|---------------------------------|

|   | (b) | Iron Ore Properties |
|--------|-----|---------------------|

|   | (i) | during fiscal 2010 Scandinavian issued 588,235 common shares and paid $28,705 to the Company; |
|--------|-----|-----------------------------------------------------------------------------------------------|

|   | (ii) | during fiscal 2011 Scandinavian issued 294,118 common shares, paid $16,570 and reimbursed the Company $10,880; |
|--------|------|----------------------------------------------------------------------------------------------------------------|

|   | (iii) | Scandinavian must spend a minimum of AUS $175,000 within 12 months prior to being entitled to withdraw.  Should Scandinavian withdraw after meeting the minimum expenditure it shall have no further interest in the Iron Ore Claims; |
|--------|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iv) | the Company grants  Scandinavian the exclusive right to earn a 51% interest in the Iron Ore Claims by spending AUS $750,000 on exploration prior to June 30, 2013; |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (v) | Scandinavian may earn a further 24% interest in the Iron Ore Claims by spending a further AUS $500,000 on exploration prior to June 30, 2014; and |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (vi) | Scandinavian may earn a further 15% interest in the Iron Ore Claims by sole funding a feasibility study on at least one Claim prior to June 30, 2018, including a minimum spend of AUS $100,000 per annum. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 6. | RESOURCE INTERESTS (continued) |
|----|--------------------------------|

| 7. | MINERAL EXPLORATION COSTS |
|----|---------------------------|

|               |   | 2011                          |      |
|--------------------|--------|-------------------------------|-----------|
|               |   | Rare Earth Element Properties |      |   |   |   |
|               |   | Norra Kärr$              |      |   | Otanmaki$ |   |   | Other$ |   |   | Total$ |   |
| Assays             |   |                          | 3,588     |   |   |   | - |   |   |   | - |   |   |   | 3,588 |   |
| Consulting         |   |                          | 197,664   |   |   |   | 69,094 |   |   |   | 10,630 |   |   |   | 277,388 |   |
| Database           |   |                          | 2,967     |   |   |   | 3,889 |   |   |   | 3,387 |   |   |   | 10,243 |   |
| Drilling           |   |                          | 546,211   |   |   |   | 125,832 |   |   |   | - |   |   |   | 672,043 |   |
| Exploration office |   |                          | 61,207    |   |   |   | 6,324 |   |   |   | 1,407 |   |   |   | 68,938 |   |
| Geochemical        |   |                          | 159,347   |   |   |   | 8,667 |   |   |   | 713 |   |   |   | 168,727 |   |
| Geological         |   |                          | 171,593   |   |   |   | 14,348 |   |   |   | 20,404 |   |   |   | 206,345 |   |
| Geosurvey          |   |                          | 48,000    |   |   |   | 67,625 |   |   |   | - |   |   |   | 115,625 |   |
| Maps               |   |                          | 1,550     |   |   |   | 2,235 |   |   |   | 3,743 |   |   |   | 7,528 |   |
| Salaries           |   |                          | 12,255    |   |   |   | - |   |   |   | - |   |   |   | 12,255 |   |
| Sample preparation |   |                          | 1,066     |   |   |   | - |   |   |   | - |   |   |   | 1,066 |   |
| Site preparation   |   |                          | 4,562     |   |   |   | 3,804 |   |   |   | - |   |   |   | 8,366 |   |
| Travel             |   |                          | 15,739    |   |   |   | 2,584 |   |   |   | - |   |   |   | 18,323 |   |
| Total              |   |                          | 1,225,749 |   |   |   | 304,402 |   |   |   | 40,284 |   |   |   | 1,570,435 |   |

|               |   | 2010                          |    |
|--------------------|--------|-------------------------------|---------|
|               |   | Rare Earth Element Properties |    |   | Iron Ore |   |   |   |   |
|               |   | Norra Kärr$              |    |   | Other$ |   |   | Properties$ |   |   | Total$ |   |
| Consulting         |   |                          | 75,255  |   |   |   | 10,679 |   |   |   | - |   |   |   | 85,934 |   |
| Database           |   |                          | -       |   |   |   | 5,072 |   |   |   | - |   |   |   | 5,072 |   |
| Drilling           |   |                          | 344,241 |   |   |   | - |   |   |   | - |   |   |   | 344,241 |   |
| Exploration office |   |                          | 24,159  |   |   |   | - |   |   |   | - |   |   |   | 24,159 |   |
| Freight            |   |                          | 8,330   |   |   |   | - |   |   |   | - |   |   |   | 8,330 |   |
| Fuel               |   |                          | 1,841   |   |   |   | - |   |   |   |   |   |   |   | 1,841 |   |
| Geochemical        |   |                          | 68,298  |   |   |   | 3,734 |   |   |   | 1,603 |   |   |   | 73,635 |   |
| Geological         |   |                          | 53,191  |   |   |   | 45,290 |   |   |   | 12,195 |   |   |   | 110,676 |   |
| Maps               |   |                          | -       |   |   |   | 633 |   |   |   | - |   |   |   | 633 |   |
| Total              |   |                          | 575,315 |   |   |   | 65,408 |   |   |   | 13,798 |   |   |   | 654,521 |   |

----

| 7. | MINERAL EXPLORATION COSTS (continued) |
|----|---------------------------------------|

|       |   | 2009                          |   |
|------------|--------|-------------------------------|--------|
|       |   | Rare Earth ElementProperties$ |   |   | Iron OreProperties$ |   |   | Total$ |   |
| Database   |   |                          | 885    |   |   |   | - |   |   |   | 885 |   |
| Geological |   |                          | -      |   |   |   | 9,649 |   |   |   | 9,649 |   |
| Maps       |   |                          | 1,054  |   |   |   | - |   |   |   | 1,054 |   |
|       |   |                          | 1,939  |   |   |   | 9,649 |   |   |   | 11,588 |   |

| 8. | SHARE CAPITAL |
|----|---------------|

| Authorized - unlimited common shares without par value                                                                                                                               |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                 |   | 2011 |   |   | 2010 |   |   | 2009 |   |
| Issued                                                                                                                                                                               |   | Shares  |   |   | Amount$ |   |   | Shares  |   |   | Amount$ |   |   | Shares  |   |   | Amount$ |   |
| Balance, beginning of year                                                                                                                                                           |   |   | 42,105,402 |   |   |   | 5,757,155 |   |   |   | 10,500,000 |   |   |   | 10,500 |   |   |   | 10,500,000 |   |   |   | 10,500 |   |
| Adjustment to reflect   the Amalgamation                                                                                                                              |   |   | - |   |   |   | - |   |   |   | 12,196,397 |   |   |   | 428,323 |   |   |   | - |   |   |   | - |   |
| Issued for cash                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |   |   | - |   |
|    Private placements                                                                                                                                                 |   |   | 5,000,000 |   |   |   | 7,500,000 |   |   |   | 18,000,000 |   |   |   | 5,350,000 |   |   |   | - |   |   |   | - |   |
|    Exercise of stock options                                                                                                                                          |   |   | 1,587,844 |   |   |   | 371,914 |   |   |   | 233,206 |   |   |   | 45,821 |   |   |   | - |   |   |   | - |   |
|    Exercise of warrants                                                                                                                                               |   |   | 9,261,043 |   |   |   | 5,141,101 |   |   |   | 1,135,799 |   |   |   | 434,639 |   |   |   | - |   |   |   | - |   |
|    Exercise of compensation      options                                                                                                |   |   | 526,000 |   |   |   | 131,500 |   |   |   | 40,000 |   |   |   | 10,000 |   |   |   | - |   |   |   | - |   |
| Reallocation from   contributed surplus      on exercise of stock         options          |   |   | - |   |   |   | 248,550 |   |   |   | - |   |   |   | 48,500 |   |   |   | - |   |   |   | - |   |
| Reallocation from   contributed surplus      on exercise of         compensation options   |   |   | - |   |   |   | 63,120 |   |   |   | - |   |   |   | 4,800 |   |   |   | - |   |   |   | - |   |
| Reallocation from   contributed surplus      on exercise of         agents’ warrants |   |   | - |   |   |   | 100,475 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                                                                                                                                 |   |   | 16,374,887 |   |   |   | 13,556,660 |   |   |   | 31,605,402 |   |   |   | 6,322,083 |   |   |   | - |   |   |   | - |   |
| Less share issue costs                                                                                                                                                               |   |   | - |   |   |   | (425,002 | ) |   |   | - |   |   |   | (575,428 | ) |   |   | - |   |   |   | - |   |
|                                                                                                                                                                                 |   |   | 16,374,887 |   |   |   | 13,131,658 |   |   |   | 31,605,402 |   |   |   | 5,746,655 |   |   |   | - |   |   |   | - |   |
| Balance, end of year                                                                                                                                                                 |   |   | 58,480,289 |   |   |   | 18,888,813 |   |   |   | 42,105,402 |   |   |   | 5,757,155 |   |   |   | 10,500,000 |   |   |   | 10,500 |   |

----

|   | (a) | On October 22, 2009 the Company completed the Amalgamation with Ausex and Lumex and issued 12,196,397 common shares of its share capital for 100% of the issued and outstanding common shares of Ausex and Lumex.  See also Note 3. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | During fiscal 2011 the Company completed a private placement of 5,000,000 units at a price of $1.50 per unit for gross proceeds of $7,500,000.  Each unit comprised one common share and one-half non-transferable share purchase warrant.  Each full warrant entitles the holder to purchase an additional common share at a price of $1.85 per share on or before November 17, 2012. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | During fiscal 2010 the Company completed private placements of: |
|--------|-----|-----------------------------------------------------------------|

|   | (i) | 6,000,000 common shares at a price of $0.10 per share for gross proceeds of $600,000.  The Company paid a finder’s fee of $27,150 cash and issued warrants to purchase 452,500 common shares at a price of $0.10 per share on or before October 23, 2011.  The fair value of the warrants, estimated using the Black-Scholes option pricing model is $22,625.  The assumptions used were:  dividend yield - 0%;  expected volatility - 90%;  a risk-free interest rate of 1.36%;  and an expected life of two years; |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ii) | 7,000,000 units at a price of $0.25 per unit for gross proceeds of $1,750,000.  Each unit comprised one common share and one non-transferable share purchase warrant.  Each warrant entitles the holder to purchase an additional common share for a period of two years at a price of $0.40 per share in year one and at a price of $0.50 per share in year two.  The Company paid a finder’s fee of $84,900 cash and granted a compensation option to purchase 566,000 units at $0.25 per unit on or before October 26, 2011.  When exercised, each unit will consist of one common share and one non-transferable share purchase warrant having the same terms and conversion provision as the private placement warrants.  The fair value of the compensation option, estimated using the Black-Scholes option pricing model, is $118,860.  The assumptions used were:  dividend yield - 0%;  expected volatility - 90%;  a risk-free interest rate of 1.36%;  and an expected life of two years. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In fiscal 2010, 40,000 units were issued on the partial exercise of the compensation options.  During fiscal 2011 the remaining 526,000 compensation options were exercised; and |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | 5,000,000 units at a price of $0.60 per unit for gross proceeds of $3,000,000.  Each unit comprised one common share and one-half share purchase warrant.  Each full warrant entitles the holder to purchase an additional common share at a price of $0.80 per share on or before March 25, 2011 and at a price of $1.00 per share on or before March 25, 2012. |
|--------|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (d) | A summary of the number of common shares reserved pursuant to the Company’s warrants outstanding at August 31, 2011 and 2010 and the changes for the years ended on those dates is as follows: |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                   |   | 2011   |       |   | 2010                          |   |
|------------------------------------------------------------------------|--------|--------|------------|--------|-------------------------------|--------|
|                                                                   |   | Number |       |   | WeightedAverageExercisePrice$ |   |   | Number |   |   | WeightedAverageExercisePrice$ |   |
| Balance, beginning of year                                             |   |   | 9,266,875  |   |                          |   | 0.50 |   |   |   | - |   |   |   | - |   |
| Assumed on Amalgamation                                                |   |   | -          |   |                          |   | - |   |   |   | 200,000 |   |   |   | 0.10 |   |
| Issued on private placement                                            |   |   | 2,629,050  |   |                          |   | 1.85 |   |   |   | 10,202,674 |   |   |   | 0.49 |   |
| Issued on exercise of     compensation option |   |   | 526,000    |   |                          |   | 0.40 |   |   |   | - |   |   |   | - |   |
| Exercised                                                              |   |   | (9,261,043 | )      |                          |   | 0.56 |   |   |   | (1,135,799 | ) |   |   | 0.38 |   |
| Balance, end of year                                                   |   |   | 3,160,882  |   |                          |   | 1.47 |   |   |   | 9,266,875 |   |   |   | 0.50 |   |

| Number |      |   | Exercise Price$ |   | Expiry Date |
|--------|-----------|--------|-----------------|--------|-------------|
|   | 125,000   |   |            |   | 0.50        |   | October 26, 2011 |
|   | 322,275   |   |            |   | 1.00        |   | March 25, 2012 |
|   | 526,000   |   |            |   | 0.40 / 0.50 |   | April 1, 2012 / 2013 |
|   | 1,354,274 |   |            |   | 1.85        |   | November 17, 2012 |
|   | 833,333   |   |            |   | 1.85        |   | November 26, 2012 |
|   | 3,160,882 |   |            |   |        |   |   |

|   | See also Note 18. |
|--------|-------------------|

----

|                     | 2011              | 2010                 |
|--------------------------|-------------------|----------------------|
| Risk-free interest rate  | 1.38% - 2.14%     | 1.45% - 1.93%        |
| Estimated volatility     | 147% - 175%       | 79% - 104%           |
| Expected life            | 2 years - 3 years | 2.25 years - 3 years |
| Expected dividend yield  | 0%                | 0%                   |
| Expected forfeiture rate | 0%                | 0%                   |

|                                                      |   | 2011             |       |   | 2010                           |   |
|-----------------------------------------------------------|--------|------------------|------------|--------|--------------------------------|--------|
|                                                      |   | Numberof Options |       |   | WeightedAverageExercise Price$ |   |   | Numberof Options |   |   | WeightedAverageExercise Price$ |   |
| Balance, beginning of year                                |   |             | 2,929,016  |   |                           |   | 0.21 |   |   |   | - |   |   |   | - |   |
| Assumed on Amalgamation    from Lumex |   |             | -          |   |                           |   | - |   |   |   | 472,222 |   |   |   | 0.10 |   |
| Assumed on Amalgamation    from Ausex |   |             | -          |   |                           |   | - |   |   |   | 690,000 |   |   |   | 0.10 |   |
| Granted                                                   |   |             | 1,700,000  |   |                           |   | 3.39 |   |   |   | 2,000,000 |   |   |   | 0.27 |   |
| Exercised                                                 |   |             | (1,587,844 | )      |                           |   | 0.23 |   |   |   | (233,206 | ) |   |   | 0.20 |   |
| Balance, end of year                                      |   |             | 3,041,172  |   |                           |   | 1.98 |   |   |   | 2,929,016 |   |   |   | 0.21 |   |

----

| 9. | STOCK OPTIONS AND STOCK-BASED COMPENSATION (continued) |
|----|--------------------------------------------------------|

| NumberOutstanding |      |   | NumberExercisable |   |      | ExercisePrice$ |   | Expiry Date  |
|-------------------|-----------|--------|-------------------|--------|-----------|----------------|--------|-------------------|
|              | 69,672    |   |              |   | 69,672    |           |   |              | 0.10 |   | May 31, 2012 |
|              | 1,175,000 |   |              |   | 1,175,000 |           |   |              | 0.25 |   | October 22, 2012 |
|              | 75,000    |   |              |   | 75,000    |           |   |              | 0.10 |   | January 25, 2013 |
|              | 50,000    |   |              |   | 50,000    |           |   |              | 0.60 |   | March 5, 2013 |
|              | 146,500   |   |              |   | 146,500   |           |   |              | 2.78 |   | December 24, 2013 |
|              | 915,000   |   |              |   | 915,000   |           |   |              | 3.45 |   | January 6, 2014 |
|              | 100,000   |   |              |   | 55,000    |           |   |              | 3.84 |   | January 17, 2014 |
|              | 200,000   |   |              |   | 80,000    |           |   |              | 4.22 |   | July 15, 2014 |
|              | 200,000   |   |              |   | 200,000   |           |   |              | 2.72 |   | August 9, 2014 |
|              | 50,000    |   |              |   | 50,000    |           |   |              | 3.20 |   | August 9, 2014 |
|              | 60,000    |   |              |   | 60,000    |           |   |              | 2.92 |   | August 22 2014 |
|              | 3,041,172 |   |              |   | 2,876,172 |           |   |              |   |   |   |

| 10. | CONTRIBUTED SURPLUS |
|-----|---------------------|

|                                                           |   |   | 2011$     |   |   |   | 2010$   |   |   |   | 2009$  |   |
|----------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|---------|--------|--------|--------|--------|--------|
| Balance, beginning of year                                     |   |   | 613,782   |   |   |   | 18,809  |   |   |   | 9,669  |   |
| Paid-in capital                                                |   |   |      |   |   |   | -       |   |   |   | 9,140  |   |
| Stock-based compensation on stock options                      |   |   | 4,437,538 |   |   |   | 340,750 |   |   |   | -      |   |
| Stock-based compensation on agent’s warrants             |   |   | 198,737   |   |   |   | 188,663 |   |   |   | -      |   |
| Stock-based compensation on agent’s compensation options |   |   | -         |   |   |   | 118,860 |   |   |   | -      |   |
| Stock options exercised                                        |   |   | (248,550  | )      |   |   | (48,500 | )      |   |   | -      |   |
| Compensation options exercised                                 |   |   | (63,120   | )      |   |   | (4,800  | )      |   |   | -      |   |
| Agents’ warrants exercised                               |   |   | (100,475  | )      |   |   | -       |   |   |   | -      |   |
| Balance, end of year                                           |   |   | 4,837,912 |   |   |   | 613,782 |   |   |   | 18,809 |   |

| 11. | RELATED PARTY TRANSACTIONS |
|-----|----------------------------|

|   | i) | incurred $181,087 (2010 - $90,250;  2009 - $nil) for accounting, administration, professional fees and rent provided by certain directors of the Company or private corporations owned by the directors; |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 11. | RELATED PARTY TRANSACTIONS (continued) |
|-----|----------------------------------------|

|   | ii) | incurred $158,250 (2010 - $97,500;  2009 - $nil) for management fees provided by a private corporation owned by an officer of the Company; and |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | iii) | incurred $8,250 (2010 - $6,200;  2009 - $nil) for shared administration costs with Tumi Resources Limited (“Tumi”), a public company with common directors and officer. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 12. | INCOME TAXES |
|-----|--------------|

|                                                                        |   |   | 2011$      |   |   |   | 2010$    |   |
|-----------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|----------|--------|
| Future income tax assets                                                    |   |   |       |   |   |   |     |   |
|      Losses carried forward                        |   |   | 674,900    |   |   |   | 291,500  |   |
|      Mineral exploration costs capitalized for tax |   |   | 481,300    |   |   |   | 142,800  |   |
|      Other                                         |   |   | 46,000     |   |   |   | 73,000   |   |
|                                                                        |   |   | 1,202,200  |   |   |   | 507,300  |   |
| Valuation allowance                                                         |   |   | (1,202,200 | )      |   |   | (507,300 | )      |
| Net future income tax asset                                                 |   |   | -          |   |   |   | -        |   |

----

|                                            |   |   | 2011$      |    |   |   | 2010$    |    |   |   | 2009$   |    |
|-------------------------------------------------|--------|--------|------------|---------|--------|--------|----------|---------|--------|--------|---------|---------|
| Income tax rate reconciliation                  |   |   |       |    |   |   |     |    |   |   |    |    |
| Combined federal and provincial income tax rate |   |   | 27.17      | %  |   |   | 29.0     | %  |   |   | 30.17   | %  |
| Expected income tax recovery                    |   |   | 1,834,000  |    |   |   | 450,400  |    |   |   | 16,000  |    |
| Effect of income tax rate changes               |   |   | (23,700    | )       |   |   | (1,000   | )       |   |   | (800    | )       |
| Foreign income tax rate differences             |   |   | (2,700     | )       |   |   | (3,200   | )       |   |   | (300    | )       |
| Non-deductible stock-based compensation         |   |   | (1,206,000 | )       |   |   | (98,800  | )       |   |   | -       |    |
| Other                                           |   |   | 56,900     |    |   |   | (21,100  | )       |   |   | -       |    |
| Unrecognized benefit of income tax losses       |   |   | (630,754   | )       |   |   | (326,300 | )       |   |   | (14,900 | )       |
| Actual income tax recovery                      |   |   | 27,746     |    |   |   | -        |    |   |   | -       |    |

|               |   | 2011    |       |
|--------------------|--------|---------|------------|
|               |   | Canada$ |       |   | Scandinavia$ |   |   | Total$ |   |
| Current assets     |   |    | 15,117,687 |   |   |   | 225,035 |   |   |   | 15,342,722 |   |
| Capital assets     |   |    | -          |   |   |   | 128,654 |   |   |   | 128,654 |   |
| Investments        |   |    | 332,144    |   |   |   | - |   |   |   | 332,144 |   |
| Resource interests |   |    | -          |   |   |   | 79,176 |   |   |   | 79,176 |   |
| Bond deposit       |   |    | -          |   |   |   | 3,292 |   |   |   | 3,292 |   |
|               |   |    | 15,449,831 |   |   |   | 436,157 |   |   |   | 15,885,988 |   |

----

|               |   | 2010    |      |
|--------------------|--------|---------|-----------|
|               |   | Canada$ |      |   | Scandinavia$ |   |   | Total$ |   |
| Current assets     |   |    | 4,553,052 |   |   |   | 134,280 |   |   |   | 4,687,332 |   |
| Capital assets     |   |    | -         |   |   |   | 25,526 |   |   |   | 25,526 |   |
| Investment         |   |    | 78,194    |   |   |   | - |   |   |   | 78,194 |   |
| Resource interests |   |    | -         |   |   |   | 36,145 |   |   |   | 36,145 |   |
| Bond deposit       |   |    | -         |   |   |   | 3,292 |   |   |   | 3,292 |   |
|               |   |    | 4,631,246 |   |   |   | 199,243 |   |   |   | 4,830,489 |   |

| 14. | FINANCIAL INSTRUMENTS AND RISK MANAGEMENT |
|-----|-------------------------------------------|

| Financial Instrument                | Category         |   |   | 2011$      |   |   |   | 2010$     |   |
|------------------------------------------|-----------------------|--------|--------|------------|--------|--------|--------|-----------|--------|
| Cash and cash equivalents                | Held-for-trading      |   |   | 5,012,487  |   |   |   | 2,894,385 |   |
| Short-term investments                   | Held-for-trading      |   |   | 10,204,609 |   |   |   | 1,705,318 |   |
| Investments                              | Available-for-sale    |   |   | 332,144    |   |   |   | 78,194    |   |
| Amounts receivable                       | Loans and receivables |   |   | 71,461     |   |   |   | 51,636    |   |
| Accounts payable and accrued liabilities | Other liabilities     |   |   | (381,479   | )      |   |   | (135,972  | )      |

----

|   | (a) | Interest Rate Risk |
|--------|-----|--------------------|

|   | (b) | Foreign Currency Risk |
|--------|-----|-----------------------|

|                                     |   | SwedishKrona |       |   | CDN $Equivalent |   |
|------------------------------------------|--------|--------------|------------|--------|-----------------|--------|
| Cash                                     |   |         | 1,085,858  |   |            |   | 167,571 |   |
| Amounts receivable                       |   |         | 328,859    |   |            |   | 50,750 |   |
| Accounts payable and accrued liabilities |   |         | (1,340,411 | )      |            |   | (206,853 | ) |
|                                     |   |         | 74,306     |   |            |   | 11,468 |   |

----

| 15. | CAPITAL MANAGEMENT |
|-----|--------------------|

| 16. | SUPPLEMENTAL CASH FLOW INFORMATION |
|-----|------------------------------------|

|                                                                 |   |   | 2011$    |   |   |   | 2010$   |   |   |   | 2009$  |   |
|----------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|---------|--------|--------|--------|--------|--------|
| Financing activities                                                 |   |   |     |   |   |   |    |   |   |   |   |   |
|      Issuance of common shares              |   |   | 412,145  |   |   |   | -       |   |   |   | -      |   |
|      Share issue costs                      |   |   | (198,737 | )      |   |   | -       |   |   |   | -      |   |
|      Contributed surplus                    |   |   | (213,408 | )      |   |   | -       |   |   |   | -      |   |
|                                                                 |   |   | -        |   |   |   | -       |   |   |   | -      |   |
| Investing activities                                                 |   |   |     |   |   |   |    |   |   |   |   |   |
|      Proceeds on sale of resource interests |   |   | 49,708   |   |   |   | 86,116  |   |   |   | -      |   |
|      Investments                            |   |   | (49,708  | )      |   |   | (86,116 | )      |   |   | -      |   |
|                                                                 |   |   | -        |   |   |   | -       |   |   |   | -      |   |

----

| 17. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES |
|-----|-----------------------------------------------------------------------------------------|

|   | (a) | The effect of the differences between Canadian GAAP and US GAAP on the significant captions of the balance sheets and the statements of loss and comprehensive loss, deficit and accumulated other comprehensive loss and cash flows is summarized as follows: |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                          |   |   | 2011$      |    |   |   | 2010$      |    |   |   | 2009$   |    |
|-----------------------------------------------------------------------------------------------|--------|--------|------------|---------|--------|--------|------------|---------|--------|--------|---------|---------|
| Operations                                                                                    |   |   |       |    |   |   |       |    |   |   |    |    |
| Net loss - Canadian GAAP                                                                      |   |   | (6,722,292 | )       |   |   | (1,553,152 | )       |   |   | (52,406 | )       |
| Option payments recognized as other income     under US GAAP (b)(ii) |   |   | -          |    |   |   | 33,359     |    |   |   | -       |    |
| Net loss - US GAAP                                                                            |   |   | (6,722,292 | )       |   |   | (1,519,793 | )       |   |   | (52,406 | )       |
| Loss per share - US GAAP                                                                      |   |   | (0.12      | )  |   |   | (0.04      | )  |   |   | (0.00   | )  |

|                                                                                          |   |   | 2011$      |   |   |   | 2010$     |   |   |   |   |
|-----------------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|-----------|--------|--------|--------|--------|
| Assets                                                                                        |   |   |       |   |   |   |      |   |   |   |   |
| Total assets - Canadian GAAP                                                                  |   |   | 15,885,988 |   |   |   | 4,830,489 |   |   |   |   |   |
| Option payments recognized as other income     under US GAAP (b)(ii) |   |   | 33,359     |   |   |   | 33,359    |   |   |   |   |   |
| Total assets - US GAAP                                                                        |   |   | 15,919,347 |   |   |   | 4,863,848 |   |   |   |   |   |

|                                                                                          |   |   | 2011$      |   |   |   | 2010$  |   |   |   |   |   |
|-----------------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|-------------|--------|--------|--------|--------|--------|
| Deficit                                                                                       |   |   |       |   |   |   |        |   |   |   |   |   |
| Closing deficit - Canadian GAAP                                                               |   |   | (8,390,790 | )      |   |   | (1,668,498  | )      |   |   |   |   |
| Option payments recognized as other income     under US GAAP (b)(ii) |   |   | 33,359     |   |   |   | 33,359      |   |   |   |   |   |
| Closing deficit - US GAAP                                                                     |   |   | (8,357,431 | )      |   |   | (1,635,139  | )      |   |   |   |   |

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| 17. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued) |
|-----|-----------------------------------------------------------------------------------------------------|

|                                                                                   |   |   | 2011$      |   |   |   | 2010$      |   |   |   | 2009$   |   |
|----------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|--------|---------|--------|
| Cash Flows - Operating Activities                                                      |   |   |       |   |   |   |       |   |   |   |    |   |
| Cash from (used for) operating     activities - Canadian GAAP |   |   | (2,771,430 | )      |   |   | (1,261,197 | )      |   |   | (25,880 | )      |
| Add gain on option of resource interests                                               |   |   | 77,158     |   |   |   | 81,462     |   |   |   | -       |   |
| Add net loss - Canadian GAAP                                                           |   |   | 6,722,292  |   |   |   | 1,553,152  |   |   |   | 52,406  |   |
| Less property option payments                                                          |   |   | (77,158    | )      |   |   | (114,821   | )      |   |   | -       |   |
| Less net loss - US GAAP                                                                |   |   | (6,722,292 | )      |   |   | (1,519,793 | )      |   |   | (52,406 | )      |
| Cash from (used for) operating     activities - US GAAP       |   |   | (2,771,430 | )      |   |   | (1,261,197 | )      |   |   | (25,880 | )      |

|   | (b) | Differences in Accounting Principles |
|--------|-----|--------------------------------------|

|   | (i) | Exploration Stage Company |
|--------|-----|---------------------------|

|   | (ii) | Property Option Payments |
|--------|------|--------------------------|

|   | (iii) | Income Taxes |
|--------|-------|--------------|

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| 17. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued) |
|-----|-----------------------------------------------------------------------------------------------------|

|   | (iv) | Recapitalization and Amalgamation |
|--------|------|-----------------------------------|

|   | (i) | In December 2007 the FASB issued new guidance for business combinations which requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions (now Accounting Standards Codification (“ASC”) 805).  It also requires that the acquirer in a business combination achieved in stages to recognize the identifiable assets and liabilities, as well as the non-controlling interest in the acquiree, at the full amounts of assets and liabilities as if they had occurred on the acquisition date.  In addition, all acquisition related costs be expensed as incurred, rather than capitalized as part of the purchase price and those restructuring costs that an acquirer expected, but was not obligated to incur, to be recognized separately from the business combination.  This guidance applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008.  The Company adopted this guidance commencing September 1, 2009 and it had no material impact on the consolidated financial statements. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | In December 2007 the FASB issued new accounting and reporting standards for the non-controlling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary (now ASC 810).  It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements.  It also requires consolidated net income and comprehensive income to be reported at amounts that include the amounts attributable to both the parent and the non-controlling interest on the face of the consolidated statement of income.  Changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation must be accounted for as equity transactions for the difference between the parent’s carrying value and the cash exchanged in the transaction.  The Company adopted this guidance commencing September 1, 2009 and it did not have a material impact on the consolidated financial statements. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 17. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued) |
|-----|-----------------------------------------------------------------------------------------------------|

|   | (iii) | In May 2009 the FASB issued ASC 855-10, Subsequent Events (formerly Statement of Financial Accounting Standards (“SFAS”) Statement No 165), which establishes principles and requirements for subsequent events.  In particular, ASC 855-10 sets forth:  (a) the period after the balance sheet date during which management of a reporting entity shall evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements;  (b) the circumstances under which an entity shall recognize events or transactions occurring after the balance sheet date in its financial statements;  and (c) the disclosures that an entity shall make about events or transactions that occurred after the balance sheet date. The new guidelines require an entity to evaluate subsequent events to the date the financial statements were issued or were available to be issued.  The Company adopted this standard commencing September 1, 2009 and it did not have a material impact to the consolidated financial statements. |
|--------|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iv) | In June 2009 the FASB issued new guidance, which is now a part of ASC 860-10 (formerly SFAS Statement No 166), to improve the relevance, representational faithfulness and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets.  This new guidance is effective for fiscal years beginning after November 15, 2009 and is not expected to have a material impact on the Company’s consolidated financial statements. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (v) | In June 2009 the FASB issued new guidance, which is now part of ASC 810-10 (formerly SFAS Statement No. 167), to improve financial reporting by enterprises involved with variable interest entities.  This new guidance requires a reporting issuer to perform an analysis to determine whether the reporting issuer’s variable interest or interests give it a controlling financial interest in a variable interest entity.  In addition, a reporting issuer is required to assess whether it has an implicit financial responsibility to ensure that a variable interest entity operates as designed when determining whether it has the power to direct the activities of the variable interest entity that most significantly impact the entity’s economic performance.  Finally, the new guidance requires ongoing reassessments of whether a reporting issuer is the primary beneficiary of a variable interest entity.  This new guidance is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter.  Earlier application is prohibited.  This new guidance is not expected to have a material impact on the Company’s consolidated financial statements. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 17. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued) |
|-----|-----------------------------------------------------------------------------------------------------|

|   | (vi) | In June 2009 the FASB issued new guidance, which is now part of ASC 105-10 (the “Codification”) (formerly Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles), which will become the source of authoritative US GAAP recognized by the FASB to be applied by non-governmental entities.  Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants.  On the effective date of the Codification, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification will become non-authoritative.  The Codification is effective for financial statements issued for interim and annual periods ending after September 15, 2009.  The adoption of the Codification only had the effect of amending references to authoritative accounting guidance in the Company’s consolidated financial statements. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (vii) | In August 2009 the FASB issued Accounting Standards Update (“ASU”) No. 2009-05, Measuring Liabilities at Fair Value (“ASU 2009-05”).  This update provides amendments to ASC 820, Fair Value Measurements and Disclosure, for the fair value measurement of liabilities when a quoted price in an active market is not available.  ASU 2009-05 is effective for reporting periods beginning after August 28, 2009.  This new guidance does not have a material impact on the Company’s consolidated financial statements. |
|--------|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (viii) | In January 2010 the FASB issued ASU No. 2010-06 (“ASU 2010-06”) applicable to FASB ASC 820-10, Fair Value Measurements and Disclosures.  The guidance requires entities to disclose significant transfers in and out of fair value hierarchy levels and the reasons for the transfers and to present information about purchases, sales, issuances and settlements separately in the reconciliation of fair value measurements using significant unobservable inputs (Level 3).  Additionally, the guidance clarifies that a reporting entity should provide fair value measurements for each class of assets and liabilities and disclose the inputs and valuation techniques used for fair value measurements using significant other observable inputs (Level 2) and significant unobservable inputs (Level 3).  This guidance is effective for interim and annual periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the Level 3 reconciliation, which will be effective for interim and annual periods beginning after December 15, 2010.  As this guidance provides only disclosure requirements, the adoption of this standard will not impact the Company’s consolidated results of operations, cash flows or financial positions. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 17. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued) |
|-----|-----------------------------------------------------------------------------------------------------|

|   | (ix) | In April 2010 the FASB issued ASU 2010-13, Compensation-Stock Compensation (Topic 718):  Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades (“ASU 2010 -13”).  ASU 2010-13 provides amendments to Topic 718 to clarify that an employee share-based payment award with an exercise price denominated in currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance or service condition.  Therefore, an entity would not classify such an award as liability if it otherwise qualifies as equity.  The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010.  The Company does not expect the adoption of ASU 2020-13 to have a material impact on the Company’s consolidated financial statements. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 18. | SUBSEQUENT EVENTS |
|-----|-------------------|

|   | (i) | granted stock options to a director of the Company to purchase 100,000 common shares at an exercise price of $3.37 per share expiring September 13, 2014 and to employees and consultants of the Company to purchase 435,000 common shares at an exercise price of $2.19 per share expiring December 6, 2014; |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | issued 125,000 common shares on the exercise of warrants for proceeds of $62,500; and |
|--------|------|---------------------------------------------------------------------------------------|

|   | (iii) | acquired a 100 % interest in the Olserum project in southern Sweden.  The Olserum project was purchased from Norrsken Energy Limited, a private company registered in the United Kingdom, for a total consideration of 37,746 common shares of the Company. |
|--------|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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