---

|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

|1.   | EXECUTIVE SUMMARY                                                   | 3 
|---- | ------------------------------------------------------------------- | --
|2.   | RESULTS OF
      OPERATIONS FOR THE FISCAL YEAR AND FOURTH QUARTER  | 5 
|3.   | FINANCIAL CONDITION REVIEW                                          | 9 
|4.   | OPERATIONS
      REVIEW                                             | 11
|4.1  | NEVADA OPERATIONS                                                   | 11
|4.2  | SOUTH AFRICAN
      OPERATIONS                                      | 21
|5.   | EXPLORATION PROPERTIES                                              | 29
|5.1  | TANZANIA                                                            | 29
|5.2  | RUSSIA                                                              | 30
|5.3  | MOZAMBIQUE                                                          | 30
|6.   | MARKET TRENDS                                                       | 30
|7.   | SELECTED
      ANNUAL AND QUARTERLY INFORMATION                     | 31
|8.   | OFF-BALANCE SHEET ARRANGEMENTS                                      | 32
|9.   | CONTRACTUAL
      OBLIGATIONS                                       | 33
|10.  | TRANSACTIONS WITH RELATED PARTIES                                   | 34
|11.  | CRITICAL
      ACCOUNTING ESTIMATES                                 | 34
|12.  | ADOPTION OF NEW ACCOUNTING POLICIES                                 | 36
|13.  | NEW ACCOUNTING
      PRONOUNCEMENTS                                 | 36
|14.  | FINANCIAL INSTRUMENTS                                               | 37
|15.  | OTHER                                                               | 37
|15.1 | INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)                | 37
|15.2 | DISCLOSURE OF
      OUTSTANDING SHARE DATA                          | 38
|15.3 | NON GAAP MEASURES                                                   | 38
|15.4 | RECONCILIATION
      OF USE OF PROCEEDS FROM MARCH 2009 OFFERING    | 39
|15.5 | RECONCILIATION OF USE OF PROCEEDS FROM NOVEMBER 2009
      OFFERING | 40
|15.6 | DISCLOSURE
      CONTROLS AND PROCEDURES                            | 41
|15.7 | INTERNAL CONTROL OVER FINANCIAL REPORTING                           | 42

1

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

|Cautionary Note regarding Forward Looking Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|This discussion includes certain statements that may be
      deemed "forward-looking statements" and information. These forward-
      looking statements constitute "forward-looking statements" within the
      meaning of Section 27A of theSecurities Act of 1933and Section 21E of theSecurities Exchange Act
      of 1934.All statements in this discussion, other than statements
      of historical facts, that address future production, reserve potential,
      exploration drilling, exploitation activities and events or developments
      that the Company expects to take place in the future are forward-looking
      statements and information. Although the Company believes the expectations
      expressed in such forward-looking statements and information are based on
      reasonable assumptions, such statements are not guarantees of future
      performance and actual results or developments may differ materially from
      those in the forward-looking statements and information. Factors that
      could cause actual results to differ materially from those in forward-
      looking statements include market prices, exploitation and exploration
      successes, drilling and development results, continued availability of
      capital and financing and general economic, market or business conditions.
      Investors are cautioned that any such statements are not guarantees of
      future performance and actual results or developments may differ
      materially from those stated herein.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Cautionary Note regarding Non-GAAP Measurements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Cash cost per ounce/ton is  not  a generally accepted
      accounting principle ("GAAP") based figure but rather is intended to
      serve as a performance measure providing some indication of the mining and
      processing efficiency and effectiveness of test mining at Hollister. It is
      determined by dividing the relevant mining and processing costs including
      royalties by the ounces produced/tons milled in the period. There may be
      some variation in the method of computation of "cash cost per ounce/ton"
      as determined by the Company compared with other mining companies. Cash
      costs per ounce/ton may vary from one period to another due to operating
      efficiencies, waste to ore ratios, grade of ore processed and gold
      recovery rates in the period. We provide this measure to our investors to
      allow them to also monitor operational efficiencies of test mining at
      Hollister. As a Non-GAAP Financial Measure cash costs should not be
      considered in isolation or as a substitute for measures of performance
      prepared in accordance with GAAP. Adjusted loss per share is also a
      Non-GAAP measure and is calculated by excluding the impact of certain
      fair-value accounting charges. There is material limitations associated
      with the use of such Non-GAAP measures.                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Cautionary Note to U.S. Investors Concerning Estimates of
      Measured and Indicated Resources                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|This document refers to measured mineral
      resources and indicated mineral resources. We advise U.S.
      investors that while these categories of mineral resource estimates are
      recognized and required by Canadian securities regulations (under National
      Instrument 43-101 Standards of Disclosure for Mineral Projects),
      the SEC does not recognize them. Mineral resources that are not mineral
      reserves do not have demonstrated economic viability. U.S. investors
      are cautioned not to assume that any part or all of mineral
      deposits in these categories will ever be converted into SEC defined
      reserves.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Cautionary Note to U.S. Investors Concerning Estimates of
      Inferred Resources                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|This document refers to inferred mineral resources.We advise U.S. investors that while this category of mineral resource
      estimates is recognized and required by Canadian securities regulations
      (under National Instrument 43-101 Standards of Disclosure for
      Mineral Projects), the SEC does not recognize it. Inferred mineral
      resources have a great amount of uncertainty as to their existence, and
      great uncertainty as to their economic and legal feasibility. It cannot be
      assumed that all or any part of a mineral resource will ever be upgraded
      to a higher category. Under Canadian rules, estimates of inferred mineral
      resources may not form the basis of economic studies, except in rare
      cases. Mineral resources that are not mineral reserves do not have
      demonstrated economic viability. None of this mineralization has been
      demonstrated to be ore nor is considered to be a mineral reserve. U.S.
      investors are cautioned not to assume that any part or all of an inferred
      mineral resource exists, or is economically or legally
      mineable.                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Cautionary Note to U.S. Investors Concerning Reserve
      Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|This document refers to proven reserves and
      probable reserves which have been determined in accordance with
      Canadian securities regulations (under National Instrument 43-101
      Standards of Disclosure for Mineral Projects), which differ from
      the SECs standards for reserve classification.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

2

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

Great Basin is a mineral exploration and development company
that is currently focused on delivering two advanced stage projects: the
Hollister Project (Hollister)on the Carlin Trend in Nevada, USA and
the Burnstone Project (Burnstone)in the Witwatersrand Goldfields in
South Africa. The Company, currently recognized as an emerging producer, will
migrate to the rank of a junior gold producer as production from these two
projects increase during 2011 and 2012. Over and above the exploration being
conducted at the above mentioned properties, greenfields exploration is being
undertaken in Tanzania and Mozambique.

This Managements Discussion and Analysis ("MD&A") should
be read in conjunction with the annual financial statements of Great Basin Gold
Ltd. ("Great Basin", the "Company", or the Group) for the years ended December
31, 2010 and 2009 which are prepared in accordance with Canadian Generally
Accepted Accounting Principles and are available through the internet on SEDAR
at www.sedar.com. All dollar amounts herein are expressed in Canadian Dollars
unless stated otherwise. This MD&A is prepared as of March 14, 2011.

|1. | Executive summary
|-- | -----------------

The objectives for the Company in 2010 were predominantly centered on delivering the Burnstone capital project to enable commencement of the production build-up in 2011, and to improve efficiencies and production costs from trial mining activities at Hollister as well as the operating efficiencies of the Esmeralda mill. The Company had to react and respond to challenges it encountered in delivering on its objectives and was successful in minimizing the impact on project delivery. The Company achieved the following:

Corporate activities

- Adjusted loss per share1for the year decreased by 69% to $0.05.
- Successfully closed a US$47 million term loan agreement in May 2010 and
  upsized the facility to US$72 million in August 2010 with proceeds used to
  fund the development of Burnstone.
- Restructured the senior secured notes (Notes) in May 2010 to cancel the
  put option on 29,500 Notes, postponing a US$35.4 million obligation until
  December 2011. The put option on a further 12,000 Notes was cancelled in
  October 2010 with the US$14.4 million settlement also postponed till December
  2011.
- Executed the credit agreement on a new US$60 million term loan facility in
  February 2011 with the proceeds to be used for full and final settlement of
  all outstanding Notes on March 15, 2011.
- Successfully closed a bought deal public offering with gross proceeds of
  $86 million (including the 15% over-allotment option) on February 23, 2011
  with proceeds to be used to fund working capital required for the Burnstone
  production build-up and advance exploration at the Hollister property.
- Restructuring of guarantee to Black Economic Empowerment (BEE) partner
  for Burnstone and reinstated good standing of loan granted.
- Settled contingent exploration liability on Rusaf acquisition with equity, thereby preserving $15 million in cash flow and avoiding further potential dilution.

_______________________________1Adjusted loss
per share is a non-GAAP measure used by the Company to compare quarterly and
annual results on a sustaining basis by eliminating out of the ordinary expenses
incurred

3

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

Nevada operations

- •	Revenue from trial mining activities more than doubled from 2009 to $100 million in 2010 with a 98% increase in Au eqv2oz sold for the
  year.
- Sold 62,604 Au eqv oz during the year that was recovered through our
  Esmeralda mill with a further 25,873 Au eqv oz recovered through third party
  milling agreements.
- 47% improvement in tons extracted from trial mining activities in 2009.
- 63% improvement in contained Au eqv oz extracted from trial mining
  activities in 2009.
- Substantially completed the optimization of the Esmeralda mill.
- Poured first gold at Esmeralda on April 14, 2010.
- Completed a total of 44,414 ft (13,459 meters) of underground exploration
  and infill drilling and 41,108 feet (12,457 meters) stope delineation diamond
  drilling during 2010.
- Successfully reduced cash production costs3per Au eqv oz by 16%
  and per ton by 11% since Q1 2010 when our Esmeralda mill commenced treating
  Hollister ore.
- Updated mineral resource statement issued in August 2010 with 1.6 million
  Au eqv oz in the combined measured and indicated categories.
- Updated mineral reserve statement issued in February 2011 showing a 13% net
  increase in proven and probable Reserves.
- Good progress with environmental impact study (EIS).

South African operations

- Commissioned all major capital projects, including the metallurgical plant,
  vertical shaft, main ventilation shaft, decline, tailings dam and required
  surface infrastructure.
- Poured first gold on October 31, 2010.
- Completed in excess of 19,061 ft (5,810 meters) of reef development.
- Successfully completed long hole stoping (LHS) trial which will be
  implemented as the preferred mining method.
- Updated mineral resource statement issued in August 2010 with 12.1 million
  ounces in the combined measured and indicated categories.
- Updated mineral reserve statement issued in February 2011 showing a 55% net
  increase in proven and probable Reserves.

The Company made significant progress in 2010 towards its
transitioning to a mid-tier gold producer. In 2011, the Company will build-up
production at Burnstone and expects further improvements from trial mining
activities at Hollister. In addition, the EIS for Hollister remains on target
for completion in late 2011, which should see the operation moving into
commercial production in 2012.

________________________________2Au eqv oz is
calculated based on US$1,000Au and US$15Ag.

3Cash production cost is a non-GAAP measure and is
calculated by deducting non-cash charges from production costs (refer to section
15.3)

4

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

| | 
| | 

Ceremonial Burnstone mine opening by the South African
Minister of Mineral Resources on February 22, 2011.

Key objectives for 2011 include:

Nevada operations

- Recovering 110,000Au eqv ounces through the Esmeralda mill at a targeted
  cash production cost of US$550  US$600 per Au eqv oz.
- Improving metal recoveries of the Esmeralda mill to achieve 92% Au and 85%
  Ag on a consistent basis.
- Completion of the EIS and obtain record of decision in early 2012.
- Continued exploration of the Blanket style mineralization, Hatter Graben,
  Velvet, Gloria and South Gwenivere targets.

South African operations

- Recovering 110,000  140,000 Au ounces at a targeted cash production cost
  of US$520  US$620 per Au eqv oz.
- Focus on increasing the rate of reef development to deliver on the planned
  production targets.
- Completion of remaining Phase II underground infrastructure.

Exploration in Tanzania and Mozambique is also planned to
resume in late 2011 once cash flow from operations become available. Delivering
on our production targets for Burnstone will be dependent on achieving the
planned rates of reef development to ensure the required stopes are available.
Management is confident that our 2011 objectives are achievable as we have the
appropriate practices in place as well as teams with the skills, experience and
passion to unlock value for our shareholders.

|2. | Results of Operations for the Fiscal Year
      and Fourth Quarter
|-- | ------------------------------------------------------------------

The Company incurred a pre-tax loss of $29.1 million for the
year ended December 31, 2010 compared to a pre-tax loss of $53.9 million in the
previous year, an improvement of 46% year on year. The 2010 pre-tax loss
includes a $10.5 million fair value adjustment on the zero cost collar (ZCC)
hedge structure that was entered into during the year. Adjusting for this fair
value charge allows for a more direct comparison of the pre-tax results year-on-year. The adjusted
pre-tax loss4of $18.6 million is a 65% improvement year-on-year.

5

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

The improvement in the pre-tax loss resulted in similar
improvements in the loss per share and adjusted loss per share for the year; the
adjusted loss per share decreased to $0.05 from $0.16 reported in 2009. The
reported decrease in the loss per share for 2010 is mainly due to the increase
in metal sold from trial mining activities at Hollister as well as the success
of the aggressive cost management campaign initiated in 2009. Revenue recognized
during 2010 more than doubled, following an almost 100% increase in the Au eqv
oz sold for the year.

The Company reported its maiden earnings per share during Q4
2010; the Company earned $0.02 per share (Q4 2009: $0.05 loss per share). The
32,300 Au eqv oz sold during the quarter was a 190% increase from Q3 2010, with
cash cost per Au eqv oz improving 19% quarter-on-quarter.

Pre-development costs incurred at the Hollister project are
still being expensed until such time as the required permitting is granted to
allow for full-scale underground mining. Accumulated pre-development costs of
$96 million have been expensed up to December 31, 2010.

Revenue

Gold and silver ounces sold were recovered from ore extracted
through trial mining activities at Hollister. The table below summarizes ore
tons treated through various processing facilities during the quarter and year
and compares them to the same periods in 2009:

3 months
      ended
    12 months
      endedDecember 31
      2010
    December 31
      2009
    December 31
      2010
    December 31
      2009Ore tons treated/sold  third party
      agreements
    5,027
    -
    43,364
    35,916Ore tons treated/sold  Esmeralda mill
    39,087
    -
    79,010
    -Total ore tons treated/sold
    44,114
    -
    122,374
    35,916


The table below provides a summary of Au eqv oz sold recovered
through the various processing facilities in 2009 and 2010.

3 months
      ended
    12 months
      endedDecember 31
      2010
    December 31
      2009
    December 31
      2010
    December 31
      2009Au eqv oz recovered sold Third party
      agreements
    389
    -
    26,185
    44,706Au eqv oz recovered sold  Esmeralda mill
    31,911
    -
    62,604
    N/ATotal Au eqv oz recovered/sold
    32,300
    -
    88,789
    44,706


Sale of 31,911 Au eqv oz recovered from the Esmeralda mill
during the quarter, generated revenue of $42.6 million. A further 389 Au eqv oz
were sold under the toll milling agreement with Queenstake, bringing the total
Au eqv oz sold for the quarter to 32,300. Net revenue of $18.1 million from
third party milling agreements, and $81.6 million from ounces recovered from our
Esmeralda mill were recorded for the year ended December 31, 2010. All of the
revenue recognized in 2009 relates to ounces recovered through third party
milling agreements. There was no revenue recognized in Q4 2009 as the Company
was still refurbishing the Esmeralda mill and no toll milling
agreements were entered into during the quarter. The Company does not plan to
make use of third party milling agreements in 2011.

____________________4Adjusted pre-tax loss is a
non-GAAP measure used by the Company to compare quarterly and annual results on
a sustaining basis by eliminating out of the ordinary expenses incurred.

6

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

Production costs

The following table provides a breakdown of the production
costs incurred on the various processing arrangements in Q4 and full fiscal year
periods of 2010 and 2009.

3 months
      ended
    12 months
      endedDecember 31
      2010
    December 31
      2009
    December 31
      2010
    December 31
      2009Production costs  Third party agreements
      ($000)
    $434
    -
    $21,348
    $20,615Production costs  Nevada operations
      ($000)
    $23,858
    -
    $ 47,483
    -Inventory adjustment ($000)
    -
    -
    $1,495
    -Total production costs ($000)
    $24,292
    -
    $70,326
    $20,615Production cost per ton sold Nevada
      operations
    $610
    -
    $642
    -Production cost per Au eqv oz sold  Nevada
      operations
    $748
    -
    $810
    -


The table below provides a summary of cash production costs for
metal recovered by the Nevada operations:

3 months
      ended
    12 months
      endedDecember 31
      2010
    December 31
      2009
    December 31
      2010
    December 31
      2009Cash production cost per ton
    $ 563
    -
    $ 589
    -Cash production cost per Au eqv oz
    $ 690
    -
    $ 743
    -


Refer to Section 15.3 for the reconciliation of cash production
cost to total production cost. Cash production costs for the Nevada
operations5over the quarter decreased 11% from the prior quarter and
amounted to $563 (Q3 2010: $635) per ton consisting of $372 (Q3 2010: $427)
mining and $191 (Q3 2010: $208) milling and haulage. On an Au eqv oz basis, cash
production costs for the quarter improved by 19% over Q3 2010 and consisted of
$455 (Q3 2010: $575) for mining and $235 (Q3 2010: $279) for milling and
haulage. The improvement in the cash production costs is a result of the
increase in tons extracted and processed during the quarter. The cash production
costs have shown a downward trend over the 2010 fiscal year as production
volumes increased. The trial mining operations are achieving their operating
cost targets but operating costs at the Esmeralda mill are higher than planned.
Improving efficiencies as well as automation of certain components within the
mill are expected to reduce the mill operating costs to within plan by end of Q2
2011.

Production costs for 2009 relate 100% to third party milling
agreements. The production costs as well as cash costs incurred on these milling
campaigns are not directly comparable to the costs incurred on ounces recovered
through our Esmeralda mill. Third party milling agreements entered into since
2008 contained a metal retention cost from the mill operator that varied for
each contract. Some agreements also had fixed metal prices and recoveries. These
charges were accounted for as a reduction in revenue with only mining costs
recorded as production costs.

____________________________________5Nevada
operations refer to metal extracted from the trial mining activities at our
Hollister property and processed through our Esmeralda mill and exclude all
other processing and/or ore sale agreements.

7

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

Depletion charge

This is a non-cash item and relates to the amortization charge
on the Hollister mineral property. It is calculated on the ratio of Au eqv oz
sold to the proven and probable reserves. The increase year on year is due to
the increase in Au eqv oz recovered and sold from trial mining at Hollister.

Exploration expenses

The exploration expense for the quarter was $2.4 million
compared to $3.2 million in the previous quarter and $4.7 million during the
quarter ended December 31, 2009. These costs predominantly relate to underground
exploration at our Hollister property which amounted to $2.2 million for Q4
2010.

Year to date exploration expenses are 37% lower than 2009 and consist of $8.2 million incurred on underground exploration at our Hollister property (2009: $13.8 million) with the remainder of the costs attributable to care and maintenance expenses on our other exploration projects. Improved drilling contracts and focusing on underground exploration at Hollister had a positive impact on the exploration costs for 2010. No surface exploration was conducted during the year.

Pre-development expenses

The pre-development expenditures relate to underground
development at our Hollister Project and amounted to $3.1 million during the
quarter compared to $3.7 million in the previous quarter and $3.7 million for
the quarter ended December 31, 2009. The decrease of 48% year on year is due to
less waste development and more focus on ore development and extraction through
trial mining. Optimizing stope and mine design also had a positive impact on the
costs incurred during 2010.

Environmental impact study

Activities on the EIS project have increased significantly
during 2010 as the project moves through the detailed project plan as agreed
between the Company and the Bureau of Land Management (BLM). The EIS is
targeted for completion in late 2011.

Foreign exchange gain

This movement predominantly relates to the fluctuation between
the Canadian (C$) and United States (US$) dollar on the senior secured notes
and term facility agreement as these are denominated in US$. The strong
performance of the C$ against the US$ in 2010 resulted in a decrease in the
liability measured in C$ with the corresponding credit charged to earnings.

Stock based compensation

The income statement charge relating to this non-cash expense
is impacted by the quantum and timing of stock options issued as well as the
valuation thereof being influenced by the volatility of the Companys share
price. The charge for the year ended December 31, 2009 includes $3.3 million
relating to the cancellation and replacement of certain stock options.

Unrealized loss on financial instruments

A loss of $3.2 million (Q3 2010: $3.7 million)  on the fair
value adjustment for the ZCC hedge program executed in August 2010 was recorded
in Q4 2010. A further loss of $3.6 million was recognized in Q3 2010 on initial
recognition of the hedge structure. The increase in the gold price since the
execution of the hedge impacted on the fair value adjustment made. The hedge
program consists of a total of 105,000 Au oz spread over a 3 year period that
commenced in January, 2011. The call option on the hedge has been priced at
US$1,705 and the fair value adjustment recorded in the financial statements is
calculated with reference to the price of the call option and impacted by gold
price volatility, US interest rates and the quantity and remaining term of the
put and call options in the structure. These fair value adjustments are non-cash charges with cash earnings only impacted should the
price of gold exceed the price of the call option.

8

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

Profit on disposal of available-for-sale financial
assets

The Company disposed of its investment in Kryso Resources Plc.
during June 2010 for a net consideration of $3.5 million (GBP2.3 million)
resulting in a profit of $489,000. The disposal of the investment was in
accordance with the Companys strategic longer term objectives.

|3. | Financial condition review
|-- | --------------------------

Total assets

Total assets increased by $270 million since December 30, 2009
predominantly due to the capital development costs capitalized at Burnstone.
Current assets have decreased by $85 million during this period as a result of a
decrease in cash balances as well as inventory.

Total liabilities

Total liabilities, excluding future income taxes, increased by
$134 million since December 31, 2009 mainly due to the following reasons:

- Convertible debenturesThe balance increased by $5 million due to the
  accretion charge being recorded over the term of this facility.
- Term facilityThe Company entered into a term facility agreement with
  Credit Suisse in May 2010 for an initial US$47 million loan that was increased
  to US$72 million during August 2010.
- Accounts payableAccounts payable and accrued liabilities increased by
  $32 million since December 31, 2009 as a result of the increase in the capital
  expenditure at Burnstone.
- Other liabilitiesA fair value liability of $10 million was recorded on
  the hedge program executed in August 2010 and a further $3 million liability
  was recorded on the fair value of the guarantee provided on behalf of the
  Companys BEE Partner (refer section 8).

Shareholders equity

During the year, the Companys issued share capital increased
by 80 million common shares due to the following transactions:

- Share purchase warrants exercised60 million share purchase warrants
  were exercised during the year and consist of 58 million $1.60 warrants that
  expired in October 2010 and 2 million $1.25 warrants that expire in November
  2011.
- Settlement of Rusaf contingent paymentIn connection with the contingent
  payment requirement contained in the original acquisition agreement, the
  Company issued 3,073,773 shares in January 2010. The terms of the remaining
  liability were amended and settled in full through the issuance of 7.5 million
  shares in June 2010, thus eliminating any further
  discovery-contingent common share issuance requirements as well as eliminating
  the mandatory exploration expenditure timetable. The Company now holds all the
  prospects outright without further obligations in terms of the acquisition
  agreement.

9

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

- Settlement of senior secured notesThe Company successfully negotiated
  the cancellation of the put option on 29,500 Notes and settled 6,925 Notes in
  May 2010. The $8.5 million (US$8.3 million) was settled by the issuance of 2.2
  million common shares to the Note holders at a price of $1.75 (US$1.72) per
  share and cash payments of $4.6 million (US$4.5 million).Through a second
  agreement, the put option on a further 12,000 Notes was also cancelled in
  October 2010 and the Company settled 3,000 Notes in December 2010 by the
  issuance of 1.5 million common shares to the Note holders at a price of 
  $2.81 per share.
- Share purchase options exercised
    6.1 million share purchase options were exercised by employees, directors  and management during the year.

At December 31, 2010, the Company had 414 million common shares
issued and outstanding. A further 25 million share purchase warrants and 16
million share options were outstanding.

Subsequent to December 31, 2010, 3.8 million warrants and 0.5
million share options were also exercised up to February 28, 2011.

The Company also successfully closed an $86 million (inclusive
of over-allotment) bought deal public offering on February 23, 2011. 34 million
shares were issued at a price of $2.55 per share under this transaction, with
net proceeds of $81.7 million.

As of the date of this MD&A the Company had 452.2 million
common shares issued and outstanding. A further 21.1 million share purchase
warrants and 19.2 million share options were outstanding.

Liquidity

The Company monitors its spending plans, repayment obligations
and cash resources and takes actions with the objective of ensuring that there
is sufficient capital in order to meet short term business requirements, after
taking into account cash flows from operations and the Companys holdings of
cash and cash equivalents. The Company believes that these sources will be
sufficient to cover the likely short and long term operating cash
requirements.

The Company utilised net cash of $1.1 million in operating
activities during the year, compared to the $55 million utilized in operating
activities during the year ended December 31, 2009. The pre-development costs
incurred at the Companys Hollister project are being expensed and are also
included under cash utilised in operating activities as opposed to investment
activities where capital development is included. Cash utilized in investment
activities increased to $233 million during the year compared to $120 million in
the year ended December 31, 2009. This increase is due to the increased
development activities associated with the completion of the Burnstone project
during 2010.

The Company received a net amount of $159 million from
financing activities during the year, compared to $229 million received in 2009.
Net proceeds from financing activities predominantly relate to the term facility
agreement ($72 million) as well as warrants and share purchase options exercised
($104 million). Management pro-actively manages future cash requirements based
on estimated cash flow from operations, planned capital investments and
financing obligations. Taking cognizance of the start-up risks associated with
new projects management has initiated and closed a bought deal public offering
in February 2011 with net proceeds of $81 million received on February 23, 2010.
Proceeds from this offering were used to settle outstanding construction creditors
for Burnstone with the remainder predominantly being used to fund working
capital during the Burnstone production build-up.

10

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

The Company also executed the credit agreement relating to a
US$60 million term loan facility with Credit Suisse AG on February 23, 2011. The
loan has a term of 4 years and is repayable in quarterly installments commencing
September 2011, and will bear interest at a premium of 3.75% over the 3 month US
LIBOR rate. The Company will execute a ZCC hedging program, consisting of a
total of approximately 105,000 Au eqv oz spread over a 4 year term, prior to
draw down. Draw down on this facility is set for March 15, 2011 with
approximately US$52 million to be applied towards full and final settlement of
the Notes issued in December 2008.

At December 31, 2010, the Company had a working capital deficit
of $21 million. Included in accounts payable and accruals are approximately $30
million construction related creditors that were only settled in February 2011
following the commissioning of the Burnstone metallurgical plant and the closing
of the bought deal public offering.

The Company has no "Purchase Obligations", defined as any agreement to purchase goods or services that are enforceable and legally binding on the Company that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction.

|4.  | Operations review
|--- | -----------------
|    |                  
|4.1 | Nevada operations

The Companys Nevada operations consist of the Hollister
Property (Hollister) located in the northern part of the Carlin Trend and the
Esmeralda Property (Esmeralda) located in the south-west close to the border
between Nevada and California. Great Basins surface exploration efforts at
Hollister during 1997-2001 resulted in the discovery and delineation of several
high-grade epithermal gold-silver vein systems on the property. The main vein
systems, called Clementine and Gwenivere, have been accessed by decline and
underground development for geological and resource confirmation and trial
extraction of mineral resources; the development also provides staging for the
ongoing exploration and development drilling that is in progress.



The EIS process for the Hollister Project is currently underway
by the BLM. Pending the completion of the EIS process and receipt of BLM
approval for the amended Plan of Operations, the underground exploration and
development activities at the Hollister Property must be conducted within the
275,000 ore tons per year limit set out in the Water Pollution Control Permit
issued by the Nevada Department of Environmental Protection , in a manner that
aims to fully protect the environment and archaeological resources near the
development and will not create any additional surface disturbance or
significant new environmental impacts.

Esmeralda consists of patented and unpatented mining claims,
fee lands, water rights and a mill. Ore extracted through the trial mining activities conducted at
Hollister is trucked to Esmeralda for metallurgical processing.

11

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

Other features of Esmeralda include crushing facilities,
stockpile areas, waste rock facilities, roads and other miscellaneous areas.
There are currently no mining activities or further exploration work being
conducted at Esmeralda.

Esmeralda is approximately 220 miles (354 kilometers) from
Winnemucca and approximately 290 miles (467 kilometers) from the Hollister
property with 80% of the latter distance over paved roads.



Progress on the Environmental Impact Statement

The Notice of Intent for the EIS was published in the Federal
Register on April 19, 2010, which formally initiated the EIS scoping process.
Work has been ongoing on all required elements of the EIS, but particularly
chapters 2 and 3, which describe the proposed action and alternatives and the
affected environment and environmental consequences of the proposed action. All
resource survey work has been completed and final reports have been approved by
BLM. Cultural resource survey work was completed in September 2010 and the final
report is being drafted. All hydrologic modeling and reports have been completed
and are awaiting final BLM approval. The preliminary draft EIS is scheduled for
completion by November 2011. The estimated completion date for the issuance of a
record of decision is early 2012.

The milestones of the EIS process to date
  are:

- Third Party Contractor (AECOM) Selection Process: Completed September
  2009;
- Public Scoping Process: Completed May 2010;
- A Preliminary Draft Environmental Impact Statement (PDEIS) was circulated
  for comments in late November 2010 and a review of the main chapters of the
  PDEIS by the Company is in progress. Recommended revisions to Chapter 2 (which
  describes the existing and proposed activities) have been forwarded to BLM.
  BLM is in process of scheduling a meeting where all parties (BLM, cooperating
  agencies, the Company and AECOM) will meet to review the comments and to make
  any necessary changes prior to the document being determined to be ready for
  public review and comment as the Draft EIS.
- Weekly EIS team conference calls have been implemented to manage and
  monitor the EIS process. The calls are attended by the Company, BLM and AECOM.

The Company requested that the BLM record in the PDEIS that the
current ore extraction rates for bulk sampling and testing in the range of 280
to 400 tons per day constitutes a no action alternative for the BLM. The BLM
agreed to this request in September 2010 and hence PDEIS is one of the material
documents in the EIS process. This accommodation by BLM has in managements view
mitigated the risks associated with the EIS as the existing trial mining rate is
expected to continue un-affected during the entire EIS process.

12

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

Trial stoping and milling6

3 months ended
      December 31 2010
    3 months ended
      December 31 2009
    12 months ended
      December 31 2010
    12 months ended
      December 31 2009Ore tons to surface
    27,490
    16,787
    98,753
    67,019Contained Au oz extracted
    25,328
    18,226
    100,867
    56,189Contained Ag oz extracted
    101,401
    99,737
    559,195
    462,746Contained Au eqv oz extracted
    26,849
    19,722
    109,255
    67,132Contained average grade Au eqv oz/ton
    0.98
    1.17
    1.11
    1.01Tons milled
    27,553
    -
    84,500
    -Recovered Au oz
    20,520
    -
    64,664
    -Recovered Ag oz
    92,003
    -
    289,136
    -Recovered Au eqv oz
    21,901
    -
    69,001
    -Au eqv oz sold
    31,911
    -
    62,604
    -Recovery % Au
    80%
    -
    82%
    -Recovery % Ag
    61%
    -
    60%
    -Cash production cost per ton sold (US$)
    US$546
    -
    US$570
    -Cash production cost per Au eqv oz sold (US$)
    US$669
    -
    US$719
    -Cash production cost per ton sold
    $563
    -
    $589
    -Cash production cost per Au eqv oz sold
    $690
    -
    $743
    -


Ore tons to surface improved 64% from the comparative quarter in 2009 with a 47% improvement in the year to date compared to the 12 months ended December 31, 2009. Ore tons for the quarter were also 23% higher than Q3 2010. The continued focus on and action plans to increase ore tons from underground are showing positive results.

Estimated contained Au eqv oz extracted improved 41% and 63%,
respectively, compared to the results for the 3 and 12 months ended December 31,
2009. Contained Au eqv oz for the quarter was also 16% higher than Q3 2010.

The Esmeralda mill achieved a new milling record in Q4 2010
with 27,553 tons milled. This is a 40% improvement over Q3 2010 and a 26%
improvement over Q2 2010, which was the previous best quarter. Recoveries for
the quarter of 80% Au and 61% Ag are still below our target of 92% Au and 85%
Ag; lower recoveries were related to the high metal content fouling the carbon
in the process. This issue is being addressed by the installation of a carbon
regeneration system and automation of certain components within the mill. While
the installation is underway, carbon is being replaced at a rate of 3 tons per
day. This measure appears to be positively impacting recoveries with preliminary
results for February 2011 showing an improvement when compared to Q4 2010.

Cash production costs for the Nevada operations over the
quarter decreased by 11% from the prior quarter and amounted to $563 (Q3 2010:
$635) per ton, consisting of $372 (Q3 2010: $427) mining and $191 (Q3 2010:
$208) milling and haulage. On an Au eqv oz basis, cash production costs for the
quarter improved by 19% over Q3 2010 and consisted of $455 (Q3 2010: $575) for
mining and $235 (Q3 2010: $279) for milling and haulage. The improvement in the
cash production costs is a result of the increase in tons extracted and
processed during the quarter. The cash production costs have shown a downward
trend over the 2010 fiscal year as production volumes increased. The trial
mining operations are achieving their operating cost targets but operating costs
at the Esmeralda mill are higher than planned. Improving efficiencies as well as
automation of certain components within the mill is expected to reduce the mill
operating costs to within plan by Q2 2011.

__________________________6Metallurgical and
cost information presented in the table are from our Esmeralda mill and exclude
results of toll milling and ore sale agreements.

13

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

Ore sales and toll milling agreements

3 months ended December 31
      2010
    3 months ended December 31
      2009
    12 months ended December 31
      2010
    12 months ended December 31
      2009Queenstake Resources USA Inc. -
      Tons milled
    5,027
    -
    9,360
    -- Au oz recovered
    359
    -
    3,152
    -- Ag oz recovered
    2,024
    -
    6,186
    -- Au eqv oz recovered
    389
    -
    3,246
    -Newmont Mining Limited
      - Tons milled
    -
    -
    34,004
    30,900- Au oz recovered
    -
    -
    20,333
    30,071- Ag oz recovered
    -
    -
    153,031
    220,960- Au eqv oz recovered
    -
    -
    22,939
    33,190Kinross Mining Limited
      - Tons milled
    -
    -
    -
    5,016- Au oz recovered
    -
    -
    -
    9,966- Ag oz recovered
    -
    -
    -
    73,461- Au eqv oz recovered
    -
    -
    -
    11,516Total - Tons
      milled
    5,027
    -
    43,364
    35,916- Au oz recovered
    359
    -
    23,485
    40,037- Ag oz recovered
    2,024
    -
    159,217
    294,421- Au eqv oz recovered
    389
    -
    26,185
    44,706


The material from the high grade stock pile delivered to Queenstake Resources USA Inc. (“Queenstake”) in November 2009 was processed during Q3 2010 under the settlement agreement signed with Queenstake on June 14, 2010. In terms of the settlement agreement the parties share the metal proceeds and milling costs of $88 per ton. The 5,000 tons of material from the low grade stock pile delivered to Queenstake during 2007 was processed in Q4 2010 under the same agreement. This concluded the planned milling campaigns with Queenstake’ Jerrit Canyon mill.

The Company completed the ore purchase agreement with Newmont
Mining Limited (Newmont) during Q3 2010. Once all materials delivered to
Newmont were crushed and sampled, the final recovered metal ounces from this
transaction amounted to 22,939 Au eqv oz.

The completion of the milling campaigns and the depletion of the stockpile that had accumulated since May 2009 allowed for a comprehensive reconciliation between contained and recovered metal in September 2010. The impact of rain and snow during this extended period of stock piling as well as using grab samples to estimate the contained metal in the stockpile create an inherent risk in achieving accurate estimates of metal on hand. The final milling campaign results showed some 12,000 Au eqv oz less being recovered than estimated from the available stock pile information in 2009. The risk of future losses is significantly mitigated now that all material are being processed through our Esmeralda mill resulting in an average of 14 days between extracting and processing the material which allows for a more diligent reconciliation process and confirmation of estimates used.

14

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

Mineral Resources

An updated estimate of the mineral resources at Hollister was
announced during August 2010. Gold equivalent ounces in the measured and
indicated categories increased by 14% from the March 2009 mineral resource
update. In managements view, resource estimates for the Hollister Property have
continued to benefit significantly from the ongoing underground stope
delineation and infill/cover drilling, which has provided the basis for detailed
planning for trial mining. An additional 320 diamond core holes (totalling
109,731 feet or 33,295 meters) were completed in the period from April 2009 to
June 30, 2010, and the information from these holes has been integrated into the
updated model. The drilling program has provided infill data to delineate stopes
for trial mining, and significantly improved our understanding of the lateral
and vertical geological continuity of the vein system. The trial mining has
generated geological mapping and channel sampling data that is used for
empirical reconciliation of the resource wireframe model versus actual excavated
vein. As a result, more stringent parameters continue to be applied to measured
and indicated classifications. The resource estimate is based on a combination
of informing surface and underground diamond drilling and ore control channel
sampling, and reflects depletion of material mined up to June 30, 2010 (the
effective date of the estimate).

At an assumed gold grade cut-off of 8.57 g/t (0.25 oz/short ton
(st)), the combined measured and indicated mineral resources in the HDB
contain an estimated 1.637 million in-situ equivalent gold Troy ounces (using an
average gold price = US$1,000/Troy ounce, average silver price = US$15/Troy
ounce with no recovery factor applied) in 1.017 million tonnes (1.121 million
short tons) with average in-situ grades of 44.73 g/t (1.305 oz/st) of gold and
354.8 g/t (10.35 oz/st) of silver. A further 1.274 million equivalent in-situ
gold Troy ounces (using an average gold price = US$1,000/Troy ounce, average
silver price = US$15/Troy ounce with no recovery factor applied) are contained
in the inferred mineral resource category of 1.349 million tonnes (1.487 million
short tons) with average in-situ grades of 23.67 g/t (0.69 oz/st) of gold and
380 g/t (11.1 oz/st) of silver, at a gold grade cut-off of 8.57 g/t (0.25
oz/st).

Summary of In Situ Mineral Resources Estimate by Gold Grade
Cut Off (August 2010)

Category
    Au Grade
      Cut-off
    Amount
      (000)
    Average Au
      Grade
    Average Ag
      Grade
    Equivalent Au ozg/t
    oz/ st
    tonne(s)
    ton(s)
    g/t
    oz/ st
    g/t
    oz/ tonMeasured
    5.14
    0.15
    389
    429
    65.06
    1.898
    545.7
    15.92
    915,8006.86
    0.20
    362
    399
    69.50
    2.027
    583.4
    17.02
    910,0008.57
    0.25
    337
    371
    74.05
    2.160
    622.0
    18.14
    903,10010.29
    0.30
    313
    345
    79.03
    2.305
    664.3
    19.37
    895,000Indicated
    5.14
    0.15
    975
    1,075
    23.10
    0.674
    167.7
    4.89
    802,8006.86
    0.20
    802
    884
    26.79
    0.781
    196.1
    5.72
    766,8008.57
    0.25
    680
    750
    30.21
    0.881
    222.5
    6.49
    733,90010.29
    0.30
    586
    646
    33.58
    0.979
    248.1
    7.24
    702,300Measured
      + Indicated
    5.14
    0.15
    1,364
    1,503
    35.06
    1.023
    275.5
    8.03
    1,718,6006.86
    0.20
    1,164
    1,283
    40.06
    1.169
    316.4
    9.23
    1,676,8008.57
    0.25
    1,017
    1,121
    44.73
    1.305
    354.8
    10.35
    1,637,00010.29
    0.30
    898
    990
    49.40
    1.441
    393.0
    11.46
    1,597,000


15

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

Summary of Hollister Property Inferred Mineral Resources
(August 2010)

Category
    Au Grade
      Cut-off
    Mass
      (000s)
    Average
      Au Grade
    Average Ag
      Grade
    Equivalent Au oz (000s)g/t
    oz/
      st
    tonne(s)
    ton(s)
    g/t
    oz/
      st
    Oz
      (000s)
    g/t
    oz/
      st
    Oz
      (000s)Total Inferred
    5.14
    0.15
    2,073
    2,285
    17.72
    0.517
    1,181
    257
    7.5
    17,115
    1,4376.86
    0.20
    1,621
    1,787
    20.98
    0.612
    1,094
    322
    9.4
    16,806
    1,3468.57
    0.25
    1,349
    1,487
    23.67
    0.690
    1,027
    380
    11.1
    16,497
    1,27410.29
    0.30
    1,170
    1,289
    25.84
    0.754
    972
    433
    12.6
    16,293
  1,216


|Note to tables: | The equivalent gold oz shown in the above tables are
      calculated by applying a gold price of US$1,000 per Troy ounce and US$15
      per Troy ounce for silver. Mineral resources that are not mineral reserves
      do not have demonstrated economic viability. Contained ounces and
      equivalent ounces are undiluted and assume 100% recoveries.
|--------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The resource classification, in comparison to the previous
estimate, reflects movement from inferred to indicated and from indicated to
measured, and underpins increasing confidence in the block estimations. The
higher confidence is directly linked to the significantly increased evaluation
database from the trial mining and underground drilling. The grade estimation
more closely reflects what is observed empirically underground. It also
indicates that there is a quantifiable increase in block grade with increased
density of sample data. The depth extent of the vein system has been maintained
at a depth of 1,318 meters (4,350 feet) above mean sea level (approximately
1,200 feet or 380 meters below surface), and is the current maximum depth extent
of inferred resources.

The mineral resource estimate was completed under the
supervision of Phil Bentley, Pr.Sci.Nat., Vice President of Geology and
Exploration for Great Basin, who is the qualified person responsible for the
estimate.

Mineral Reserves

An updated estimate of the mineral reserve at Hollister was
announced during February 2011. Mineral reserves were determined or declared
using a gold cut-off grade of 8.57 g/t (0.25 oz/st). The Hollister Property is
still in the trial mining stage; however, based on production techniques tested
to date, the Company has estimated applicable call factors for mining of
approximately 85% and metallurgical recoveries of approximately 92% for Au and
85% for Ag. Since the 2009 Mineral Reserve estimate, a total of 165,772 tons
have been extracted at an average grade of 36.4 g/t (1.06 Au eqv oz/ton),
yielding 176,387 Au eqv oz.

Reconciliation between the January 2009 and January 2011
Reserve Estimates without applying the call factors at a cut-off grade of
0.25 oz/st and taking depletion into account

Description
    Cut-off oz/ton
    Tons (000)
    Au eqv oz/ton
    Au eqv oz (000)January 2009
      Reserve estimate*
    0.25
    1,398
    0.90
    1,257Apply 85% call factor
    N/A
    ----
    ----
    (188)Trial mined 2009  2011
    N/A
    (166)
    1.06
    (176)Apply metallurgical recoveries
    N/A
    ----
    ----
    (90)Restated January 2009 Reserve estimate
    N/A
    1,232
    0.65
    803January 2011 Reserve estimate
    0.25
    1,048
    0.87
    907Mineral
      Reserves added
    
    
    
    104


Note: * No mining and plant recovery factors applied. The
January 2011 figures use the same gold and silver prices as noted for resources
above, whereas the January 2009 Au eqv oz were based on US$800 for gold and $12
for silver, in each case per Troy ounce.

16

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

As the Hollister Property did not have a dedicated plant, no
metallurgical recoveries or call factors were applied to the January 2009
Reserve statement.

A minimum stoping width of 0.91 meters (36 inches) was assumed
for purposes of Mineral Reserve estimation, along with dilution defined as waste
tonnes (or tons) carrying zero grade and 100 percent in-stope extraction. An
analysis by the Companys technical staff confirms that no systematic, in-stope
pillars will be required because of the cut-and-fill trial mining method now
being utilized. Based on the results of trial stoping and grade reconciliation
studies, where vein widths of 0.76 meters (30 inches) or greater were
considered, a total of 0.15 meters (six inches) of hanging wall dilution and
0.15 meters (six inches) of footwall dilution was applied. Where appropriate,
other average dilution rates were applied. The in-situ wireframe model generated
with the measured and indicated mineral resources in the table above was used as
basis for this mineral reserve update.

Summary of the Hollister Property Mineral Reserve Estimates
at a 8.57 g/t (0.25 oz/st)(January 2011)

Reserve Category
    Au Cut-off Grade oz/st
    Tons
    Au oz/st
    Ag oz
    Ag oz/st
    Ag oz
    Au eqv ozProven
    0.25
    347,100
    1.33
    460,300
    7.75
    2,689,400
    500,700Probable
    0.25
    701,800
    0.53
    371,800
    3.27
    2,296,600
    406,300Total Proven
      & Probable
    0.25
    1,048,900
    0.79
    832,100
    4.75
    4,986,000
    907,000


|Note: | The equivalent gold ounces reported above are as stated
      by the Company. They were calculated by the Company by applying a gold
      price of US$1,000 per Troy ounce, a silver price of US$15 per Troy ounce.
      A Mining Call Factor of 85% and Metallurgical Recovery factors of 92% for
      Au and 85% for Ag were applied.
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The mineral reserve estimate was completed under the
supervision of Johan Oelofse, Pr.Eng, FSAIMM, Chief Operating Officer for Great
Basin who is the qualified person responsible for the estimate. A technical
report on the Resource and Reserve update was completed in February 2011 and
filed on www.sedar.com.

Underground Drilling

Underground drilling is an important phase of evaluation,
enabling more detailed delineation of vein mineralization. The updated in-situ
vein model now reflects 32 veins, compared to 21 in 2009. Three drill rigs are
currently utilized underground evaluating i) future trial stopes, ii) Blanket
mineralization above the Tertiary volcanic unconformity, and iii) exploration
and infill targets to test continuity of mineralization.

Of note are advances being achieved in understanding the
vertical expression of the mineralization hosted in the epithermal vein systems
from depth and upwards to surface. Recent advances in the 3000N 1E trial stope
on the Clementine vein #18 have exposed mineralization occurring at and above
the unconformity between the Ordovician (~ 430 million year) metasediments and
overlying Tertiary (12-15 million year) volcanic. Spectacular enrichment in gold
and silver grades in this so-called Blanket zone have been exposed. A tabulation
of the results is shown below.

17

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

Distance along strikeDistance Feet
    Channel Au opt.
    Dil Channel Au opt.
    Muck Au opt.0 10 20 30 40 50
      60 70 80 90 100 110 120 130 140
      150 160 170
    46.6 55.7 189.4
      12.8 464.0 32.4 69.6 752.8 2,560.4 283.8
      228.5 99.5 1.5 36.0 24.2 7.4 3.7 2.5
    6.7 4.8 18.9 2.6
      92.8 16.2 34.8 188.2 640.1 70.9 68.5 24.9
      0.8 9.0 12.1 3.7 0.6 0.4
    - - 1.0 1.7
      26.3 - 8.2 16.0 79.6 116.0 19.8 3.4
      1.4 4.7 4.9 7.5 - -Average
    270.6
    66.4
    22.3


Figures showing the stope locality, channel sample results and
Blanket Zone targets are shown below.



Figure 1 : Trial mining stope 3000N 1 E Lift 43 plan view
channel assays (Au oz/ton)

18

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  



Figure 2 : Existing Blanket Zone high grade drilling
intercept clusters relative to trial mining stope 3000N 1E

The very high grade zones are directly related to the
propagation of the Clementine vein #18 structure upwards into the Tertiary
volcanic strata, and upwards to surface, creating a geothermal vent, close to
the historical Clementine mercury mine. The 3000N 1E trial stope is at an
elevation of 5,440 feet (1,648 meters) above sea level, and there is an
estimated 360 feet (~109 meters) to surface (5,800 feet (1,758 meters) above sea
level). The dimensions of the current exposures in 3000N 1E will be investigated
by a combination of diamond core drilling, cross cuts and raises.

The evaluation of Blanket Zone material progressed during Q4
2010. Bulk sampling involved the successful extraction of some 500 tons grading
on average 12 oz/ton Au eqv. An initial phase of underground drilling was
initiated to determine the grade profile and strike continuity of the Blanket
Zone style of mineralization exposed at 3000N 1E. As at February 21, 2011, 5
boreholes (each approximately 600 feet long) had been completed. A further 11
holes are planned for completion by end March 2011 to enable preliminary mineral
resource modelling. The super high grade (>10 oz/ton Au) zones are directly
related to vertical extensions into the Tertiary volcanic strata of narrow
mineralised structures in the underlying Ordovicician metasediments.

Potential exists to test other Blanket style zones in similar
structural settings at the top of all mineralized epithermal veins included in
the current life of mine plans for Hollister.

The first long flat underground borehole testing the Velvet
area to the north of current infrastructure (HDB 432; EOH 2,800 ft) was
completed on February 14, 2011. The borehole intersected a number of silicified
and weak to moderately mineralised silicified zones and fault structures that
are indicative of fluid circulation and alteration. As at February 22, 2011, a
second hole had reached 1,520 ft with approximately 1,480 ft remaining. The
structural and alteration features in this area are being modelled so as to put
the borehole results into context.

Underground structural mapping has helped advance the geometry
of structures localizing vein development. A left-lateral side-stepping
pattern of vein clusters is emerging, and specifically supports the ongoing
drilling program which will focus on extensions of the Gloria vein system to the
west/northwest, encouraging Gwenivere intersections to the southeast, and
development of a subparallel vein system to the north.

19

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|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

Underground drilling during Q4, 2010 continued to gain positive
results for the recently discovered SE Gwenivere vein system. Preliminary
modelling of the vein system has been initiated.

Surface Exploration

No surface exploration drilling was conducted during the year.
The integration of geophysical survey interpretations (in particular geological
structures) with available geological data has progressed, but still needs tying
in with exposed and mapped underground structures. Permitting by the BLM for the
next round of surface exploration drilling on the Hatter and Ivanhoe Plan of
Operations has been received.

The second Hollister geochemical standard, which will match the
common grade range of the ore stockpile material (~ 1 oz/ton / 31 ppm Au and 8
oz/ton / 250 ppm Ag) is still in the process of being completed. The sample,
comprised of approximately 1,500 pounds of coarse crushed drill core rejects,
has been pulped and prepped by American Assay Laboratories. The sample will be
mixed in a ribbon blender prior to its use in round robin assay analysis. These
standards are a critical step to accurate QAQC analysis of laboratories used for
assaying the various sample sources (eg. exploration drilling, channel, core
drilling, and bulk blanket-style).

Safety watch list

On November 19, 2010, the Company was notified by letter from
the Federal Mine Safety and Health Administration (MSHA) that MSHA had
conducted a pattern of violation screening pursuant to Section 104(e) of the
Federal Mine Safety and Health Act of 1977(the Mine Safety Act). The
letter stated that MSHA has initially concluded that a potential pattern of
violations exists at Hollister and set out a process by which Hollister could
work with MSHA to avoid any further sanctions pursuant to that program.

MSHA’s initial finding was based mostly on alleged violations, rather than violations which had been fully adjudicated. Many of the alleged violations that form the basis for MSHA’s finding as well as the injury severity measure screening data used by MSHA, are being challenged by the Company. The Company is confident that it will prevail in the great majority of those challenges and believes, for that and other reasons, that it should be removed from the watch-list without the penalties of Section 104(e) of the Mine Safety Act being invoked.

Plans for fiscal 2011

The Company plans to continue its trial mining (ore removal and test-processing) activities at Hollister within the allowable ore tonnage authorizations of its existing permits, with all extracted material to be processed at the Esmeralda mill. A carbon regeneration system will be installed at the Esmeralda mill to enhance recoveries by preventing carbon fouling. The Nevada operations are targeted to produce an estimated 110,000 Au eqv oz in 2011 at a cash cost estimated to range between US$550 to US$600.

The Company is continuing with underground infill drilling with
a view to bringing the current inferred mineral resources into the indicated or
measured categories, as well as step-out drilling to further explore the
potential for western, northwestern, down dip and Blanket zone extensions to the
mineralized vein systems. The results of underground mapping and exploration
drilling continue to refine the Companys understanding of the Hollister
Property deposit, to the extent that additional mineralization continues to be
identified within the mineralized vein systems.

The Company will also continue working on finalization of the
EIS for Hollister by Q1 2012.

20

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|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

|4.2 | South African operations
|--- | ------------------------

The Burnstone Property is located in the South Rand area of the
Witwatersrand Goldfields, approximately 50 miles (80 kilometers) southeast of
the city of Johannesburg and near the town of Balfour. The Burnstone Project has
received all of the required permits to complete the development of the mine and
commence full-scale underground mining. Block B and Block C, containing an
estimated 280,000 oz and 231,400 oz of Au, respectively, will be the first areas
of the ore body to be accessed and mined in the next 36 months, while
underground access to the remaining areas of the ore body under the mine plan is
being developed.

Permitting

On February 17, 2009, Southgold Exploration (Pty) Ltd
(Southgold) (100% subsidiary of the Company) was officially awarded the right
to mine for gold, silver and aggregate in the Burnstone mining area for a period
of 18 years from date of execution of the mining right, as well as renewal
rights.

On October 5, 2010 the South African Diamond and Precious Metal
Regulator (SADPMR) granted a Precious Metal Refining License to Burnstone for
a period of 30 years authorizing the smelting, refining or changing the form of
unwrought precious metal. This allowed the Company to commission the gold room
in the metallurgical plant in late October 2010.

On October 18, 2010 the SADPMR granted an export license to
Burnstone authorizing the export of gold and silver and thereby allowing for the
sale of precious metal.

Commissioning of capital projects

The initial mine capital expenditure program has generally been completed and the mine has commenced with production build-up. Major capital projects that include the vertical shaft, metallurgical plant, decline, ventilation shaft and required surface and underground infrastructure have been commissioned by January 2011. The components of the mine required to enter commercial production have thus been completed and commissioned and therefore conclude the development phase of the project. Revenue and production costs will be recognized as from Q1 2011 with capitalization of further development costs as per the Company’s accounting policy.

Vertical shaft complex

The vertical shaft is intended primarily for rock hoisting, but
is also equipped for the insertion and extraction of men and material. For this
purpose, two winders have been installed. The 7.5 meter diameter vertical shaft,
lined with 300mm concrete is designed for the extraction of rock at a rate of
206,000 tonnes per month. Shaft bottom (1,601 ft/488 meters) was reached in May
2010 which concluded the sinking phase of the project. The decline was also
holed with the vertical shaft in Q2 2010, resulting in additional access to 40
level as well as improved ventilation.

The main equipping of the shaft commenced in Q3 2010 and was completed during Q4 2010. The focus was to first get the winders (personnel and rock) commissioned and licensed. Both were licensed on October 15, 2010 by the Department of Mineral Resources. Tipping arrangements on 40 Level through the temporarily ore pass was completed on October 30, 2010 and trial tipping started on November 2, 2010. The development of the remaining underground station infrastructure that includes another three ore passes, the settlers and a clear water dam commenced in November 2010 and will be completed in Q2 2011 which will allow the vertical shaft to operate at full design capacity.

21

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|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

Metallurgical plant

The metallurgical plant for Burnstone was designed for a
production rate of 125,000 tonnes per month with an increase to 175,000 tonnes
per month by adding a second ball mill in-line with the production profile of
the mine. A combination of a Semi Autogenous Grinding (SAG) mill and Ball mill
with a Carbon-in-Leach (CIL) process is used to maximize recoveries.

The completion of the plant terrace and site establishment by
the construction contractors in February 2010 allowed for commencement of plant
construction. An aggressive construction schedule was followed to ensure the
plant was delivered as a fully integrated, commissioned unit by the end of 2010.
The project encountered various challenges that included extraordinary rainfall,
extreme cold winter as well as the impact on deliveries and contractors by the
soccer world cup hosted in South Africa in July 2010. The construction schedule
was closely monitored and alternative measures were put in place to keep the
delivery schedule intact. Additional shifts were implemented and additional
contractors were brought onto site to catch-up lost time.



Construction of Metallurgical Plant completed within 12
  months.

Diesel powered generators were used for power generation during
the construction phase. The late delivery of permanent power to the site had a
severe impact on the delivery schedule as commissioning of the major components
could not commence without it. The commissioning of the plant was structured in
a manner that allowed for this to be done sequentially. The crusher and the silo
feed conveyer were commissioned on October 4, 2010 with crushed material being
fed into the silo. Conveyers were run at low speed for the duration of the
commissioning phase to ensure optimal performance prior to production.

22

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|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

The SAG and Ball mills were commissioned in October, 2010. The
SAG and Ball mills are controlled using medium voltage drives, which offer
improved reliability through the use of high voltage insulate gate bipolar
transistors that are 99% efficient at full load and have a high dynamic response
based on voltage source inverter technology. This is the first application of
this power management technology in South Africa.

The tailings storage facility, inclusive of a bulk water
storage dam was also completed in Q3 2010 to coincide with the commissioning
schedule of the plant.

Gold slag recovered from the mills during the refurbishment
process was used to commission the gold room in October, 2010. The first gold
pour took place on October 31, 2010 with gold recovered through the gravity
circuit. Commissioning of the gravity and CIL circuits as well as the thickener
is now completed allowing for the uninterrupted processing of material starting
in February 2011.

Close-out of construction packages is targeted for completion
in Q1 2011. The plant has achieved its targeted rate for January 2011 of 90,000
tonnes milled. The current focus is to ramp up production and achieve a milling
rate of 125,000 tons per month by July 2011.

General surface infrastructure

- PowerThe first phase for power supply to Burnstone consisting of 21
  MvA, and on-site power reticulation has been completed and all facilities on
  site are now connected to Eskom power. Power supply to site will build-up to
  the required 51 MvA with the upgrade of the existing Eskom sub-station and
  feeder lines by the end of Q3 2011. Current Eskom supply is adequate to
  complete commissioning and to allow for the planned production build-up.
- Ventilation shaftThe presence of a 100 feet (30 meters) coal seam
  resulted in a partial collapse of the sidewall close to surface during Q2
  2010. Additional support work which included a 27 feet (8 meters) steel sleeve
  was installed and the subsided area backfilled with concrete to stabilize the
  top portion of the shaft. Further support with shotcrete, mesh, lacing as well
  as long anchors were also installed. The installation and commissioning of the
  three 720 kW fans has been completed and these are now operational.

Long Hole Stoping (LHS)

The LHS trial has been completed in Q4 2010, following 12
months experimenting with drilling, blasting and cleaning techniques. The
progress made and results achieved during the trial period enabled the Company
to implement LHS as the preferred mining method and develop a life-of-mine
(LOM) plan based on this mining method. Our ore body also allows us to use LHS
due to the relative flat dip (7  11 degrees) as well as the fact that we are
mining at depths of 924  1,980 ft (280  600 meters) for the majority of the
LOM. The development of standard drill rigs being able to drill the 50 ft (15
meters) extremely accurate also benefits this mining technique. The remainder of
the equipment is also standard to the industry and includes load haul dumpers,
dump trucks, roof bolters and single and twin boom drill rigs used for
development in most underground mines throughout the world. The actual drilling,
blasting and cleaning of the stope material is performed by a few specialized
teams that have received the necessary training while the majority of the
workforce focuses on development and support services to the mine.

23

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  



Figure 3 : Plan view of LHS stope lay-out.

As illustrated in Figure 3, reef areas are cut into 113 ft
(34.5 meters) by 113 ft blocks by low profile reef drives of 13 ft (4 meters) by
7 ft (2 meters). T shaped pillars of 15 ft (4.5 meters) are left for support
with the T configuration also providing support with blasting and cleaning of
material into the low profile reef drives. Every fifth reef drive is a high
profile drive of 15 ft (4.5 meters) by 15 ft. Low profile load haul dumpers muck
the blasted material from the low profile drive to the high profile drives where
it is loaded onto dump trucks and transported to the vertical shaft for
hoisting.

The reef development completed thus far as well as the
information from drilling has indicated an average channel width of 2.24 ft
(0.68 meters). During the trial period the stoping team had been successful in
managing the dilution to the average channel width. Ensuring that dilution is
managed to the minimum will remain a key focus during the LOM as this will
create the opportunity to increase the ore tons delivered to the plant at an
increased head grade.

LHS has numerous benefits that include:

| | a. | Safety                                                                                                                                                                                                                           
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                  
| |    | No personnel enter the stopes as trackless drill rigs are
      used to drill into the reef from the reef drives.                                                                                                                
| |    |                                                                                                                                                                                                                                  
| | b. | Skills                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                  
| |    | Our employees all had 10 years of schooling and are fluent in English. This enables us to utilize world-class training and testing techniques to equip our personal with the skills required.                                    
| |    |                                                                                                                                                                                                                                  
| | c. | Efficiencies                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                  
| |    | LHS enables us to achieve significantly higher efficiencies than conventional mining in terms of tons and ounces per employee. Production build-up and the sustaining rate of production is higher than with conventional mining.

24

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

Underground development and Production Build-up

Good progress continues to be made to open up mining blocks B
and C. A total of approximately 19,061ft (5,810 meters) of reef development had
been completed for the year ended December 31, 2010 with 21,792 ft (6,644
meters) of reef development being completed to date.

Tons from reef development will be treated by the Plant but due
to the added dilution associated with these tons a relatively low head grade is
delivered to the mill. The rate of stoping will be increased as more stopes
become available which will increase the blended head grade delivered to the
Plant. Production build-up during 2011 to reach the planned Au ounces of 110,000
to 140,000 for the year will be dependent on achieving the planned rate of
development as this will ensure required stopes being available to achieve
production targets. Development rates will increase from a monthly average of
3,300 ft (1,000 meters) in Q1 2011 to 10,000 ft (3,000 meters) by the end of Q4
2010. As at December 31, 2010, approximately 197,000 ore tonnes from mining and
development had been accumulated on the surface stockpiles at an average grade
of 1 g/t. These tons are being co-mingled with development and stope tons mined
in Q1 2011 to allow for a steady increase in the milling rate from 90,000 tonnes
in January to 125,000 tonnes in July 2011. The blended head grade will also
increase from 0.03 Au oz/t in Q1 2011 to 0.10 Au oz/t in Q4 2011.

Mineral resources

A mineral resource estimate was announced in August 2010 based
on a 4 2 1 model, which uses a minimum of four informing samples for a
measured resource classification 2 for an indicated classification and 1 for an
inferred classification. The number of informing Kimberley Reef intersections
utilized in this resource estimate totals 610, inclusive of 339 surface
boreholes, 35 underground boreholes, and 362 underground channel intersections.
In addition, historic deflections from surface boreholes totalling 819 have been
used where appropriate for assay and sedimentological confirmation. Geozones of
the area of interest were updated as part of the basis for the estimation, but
have remained very similar to the previous June 2009 update. These zones are
delineated by a combination of variable geological parameters such as channel
width, gold grade (g/t) and gold accumulation (cm.g/t), footwall lithology, and
sedimentary facies.

Variography generated from the current geostatistical analyses
have confirmed sediment influx from the NE in Geozones 1 and 3, mixing with an
overall NW  SE paleofacies trend, and in line with previous observations. The
continued underground exposure of Kimberley Reef is providing a basis for
detailed evaluation data (channel samples) and structural mapping. All told, the
results demonstrate higher confidence in the estimated total Measured and
Indicated resources An updated resource model was announced in February 2011
using the same estimation parameters but more stringent classification criteria,
which is a minimum of 6 informing samples for measured, 3 for indicated and 2
for inferred. These resources are tabulated below:

25

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|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

Summary of the Burnstone Property Measured and Indicated
Mineral Resource at Various Cut-off Gold Content (Cmg/t) (February 2011)

Classification
    Content Cmg/t
      cut off
    Millions
      tonnes
    Au g/t
    Au ozMeasured
    300
    41.2
    5.67
    7,496,000350
    37.2
    5.78
    6,900,000400
    33.1
    5.94
    6,326,000Indicated
    300
    23.5
    7.31
    5,516,000350
    21.3
    7.60
    5,199,000400
    19.8
    7.77
    4,956,000Total measured and
      indicated
    300
    64.6
    6.26
    13,012,000350
    58.4
    6.44
    12,099,000400
    53.0
    6.63
    11,283,000


Summary of Burnstone Property Inferred Mineral Resource at
Various Cut-off Gold Content (Cmg/t) (February 2011)

Classification
    Content cmg/t
      cut off
    Millions
      tonnes
    Au g/t
    Au ozInferred
    300
    66.8
    4.33
    9,306,000350
    54.9
    4.75
    8,374,000400
    49.1
    4.86
    7,679,000


|Note: | Resources are calculated by applying a gold price of
      US$1,000 per Troy ounce and US$15 per Troy ounce for silver. Mineral
      resources that are not mineral reserves do not have demonstrated economic
      viability. Contained ounces and equivalent ounces are undiluted and assume
      100% recoveries.
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Comparison of the 6 3 2 and the 4 2 1 Mineral Resource
Estimate Models

6 3 2(1)model
    4 2 1(2)modelResource
    Cut off
    Mass
    Au grade
    Au Content
    Mass
    Au grade
    Au ContentClassification
    cmg/t
    M tons
    g/t
    oz
    M tons
    g/t
    OzMeasured
    300
    41.2
    5.67
    7,496,000
    40.0
    5.78
    7,435,000350
    37.2
    5.78
    6,900,000
    36.5
    5.90
    6,927,180400
    33.1
    5.94
    6,326,000
    33.7
    6.01
    6,514,390Indicated
    300
    23.5
    7.31
    5,516,000
    31.2
    6.44
    6,472,770350
    21.3
    7.60
    5,199,000
    27.2
    6.84
    5,978,830400
    19.8
    7.77
    4,956,000
    24.1
    7.20
    5,567,960Measured + Indicated
    300
    64.6
    6.26
    13,012,000
    71.2
    6.07
    13,907,770350
    58.4
    6.44
    12,099,000
    63.7
    6.30
    12,906,010400
    53.0
    6.63
    11,283,000
    57.8
    6.50
    12,082,350Inferred
    300
    66.8
    4.33
    9,306,000
    67.5
    4.33
    9,392,970350
    54.9
    4.75
    8,374,000
    61.0
    4.49
    8,799,830400
    49.1
    4.86
    7,679,000
    52.2
    4.75
    7,977,520


|Note:                                                                                                          | The contained gold oz are calculated using a gold price
      of US$1,000 per Troy ounce. Mineral resources that are not mineral
      reserves do not have demonstrated economic viability. Contained ounces are
      undiluted and assume 100% metallurgical recovery. Measured and Indicated
      Resource includes Proven and Probable reserves.
|-------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                               |                                                                                                                                                                                                                                                                                                                                                       
|(1) 6 3 2 indicates minimum number of
      informing points for measured (6), indicated (3) and inferred (2).
|                                                                                                              
|(2) 4 2 1 indicates minimum number of
      informing points for measured (4), indicated (2) and inferred (1).

26

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

At a 350 cmg/t cut-off, the tighter classification parameters have resulted in an 8% decrease in total measured and indicated resources tonnage, a 2% increase in grade from 6.30 to 6.44 g/t Au, and a combined 6% adjustment downwards of contained gold in the measured and indicated resources categories from the 2009 mineral resource estimate.  The 350 cmg/t cut-off is lower than the 400 cmg/t used for previous estimates and conversions to mineral reserves, reflecting increased confidence in these estimates. This cut-off is also in line with the mineral reserve cut-off, and is anticipated to decrease slightly in the future due to increased confidence in pay limit calculations.

The updated estimate was completed by Freddie de Bruin,
Pr.Sci.Nat., of Deswik Consultants under the supervision of Phil Bentley,
Pr.Sci.Nat., Vice President Geology and Exploration for Great Basin, who is the
qualified person responsible for the estimate.

Mineral Reserves

At the Burnstone Property, mineral reserves increased by 55%
with the majority of the increase attributable to the improved geological
information obtained from underground development and drilling conducted since
the January 2009 reserve update as well as additional reserves included from
Area 2. Detailed planning has shown that production at Area 2 of the Burnstone
Property can be increased and be extracted through separate infrastructure.
Since the January 2009 reserve update, the Company has completed over 6,000
meters (19,685 feet) of on-reef development and over 3,851 meters2(41,452 feet2) of LHS. The January 2011 mineral reserve update
and Life-of-Mine planning is based on LHS as the preferred mining method, and
the decrease in dilution from this mining method has also positively impacted on
the updated reserve estimate.

At a cut-off gold content of 350 centimeter-grams per tonne
(cmg/t) the combined proven and probable mineral reserves of the Burnstone
Property are 6.4 million Au oz grading 4.47 g/t (0.13 oz/ton) Au after
application of a 95% Call Factor for mining and a 95% metallurgical recovery.
Currently, 53% of the measured and indicated mineral resources have been
converted into proven and probable reserves.

The proven and probable reserves have been determined in terms
of Canadian regulations under NI 43-101, which differ from the SECs standards
for such classification.

Summary of Burnstone Diluted Reserve Estimates at a 350 cm
g/t Gold Content Cut-off (January 2011)

Category
    Tonnes Treated
    Recovered Grade
      (g/t)
    Recovered Au
      content (oz)Proven
    29,784,000
    4.11
    3,933,000Probable
    14,436,000
    5.23
    2,427,000Proven and Probable Reserve
    44,220,000
    4.47
    6,360,000


|Note: | The gold ounces reported above are as stated by the
      Company. They were calculated by the Company by applying a gold price of
      US$ 1,000 per Troy ounce. Dilution factors including LHS panels where the
      channel width is < 60 cm and Metallurgical Recovery factors of 95% for
      Au were applied.
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The reserve estimate was completed under the supervision of
Johan Oelofse, Pr.Eng, FSAIMM, Chief Operating Officer for Great Basin who is
the qualified person responsible for the estimate. A technical report on the
Resource and Reserve update was completed in February 2011 and filed on www.sedar.com.

27

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

Underground drilling

Drilling totalled 25,905 ft (7850 m) for the year, split
between 4,907 ft (1,487 meters) cover and 20,998ft (6,363 meters) delineation
drilling. The focus continues to be on Block C delineation and infill evaluation
to support the mine plan. The number of operating rigs increased to six during
the year. In addition, a more powerful LM75 diamond drill rig capable of
drilling holes up to 3,300 ft (1,000 meters) was mobilized in order to drill
deeper fan boreholes into Block C.

Surface drilling

Surface drilling was aimed towards infill drilling in the
initial mine plan area. Twenty-three surface diamond boreholes were completed
during 2010. This drilling specifically targeted areas where better resolution
structural data was needed. Work programs outside the mining right as well as
investigations of sub-cropping mineralization in four areas are being reviewed.
In particular a 3-D seismic survey is being scoped for possible effecting in
2012.

Project capital

The table below provides a summary of the project capital spent
to date (converted at a fixed exchange rate of CAD/ZAR = 7.22) .

Historical
      spent CAD (million)
    Actual
      capital Q1 2010 CAD (million)
    Actual
      capital Q2 2010 CAD (million)
    Actual
      capital Q3 2010 CAD (million)
    Actual
      capital Q4 2010 CAD (million)
    Total
      capital 2010 CAD (million)
    Project to
      date capital CAD (million)Process plant
    $ 23
    $ 10
    $ 31
    $ 27
    $ 23
    $ 92
    $ 114Mining equipment
    18
    1
    3
    4
    11
    19
    36Vertical shaft complex
    40
    10
    11
    7
    7
    34
    74Mine development
    62
    5
    6
    5
    14
    30
    91Tailings dam
    -
    1
    4
    4
    2
    11
    11Total capital costs
    $ 143
    $ 27
    $ 55
    $ 47
    $ 56
    $ 185
    $ 326Pre-production operating costs
    25
    9
    14
    20
    21
    64
    89Total capital
    $ 168
    $ 36
    $ 69
    $ 67
    $ 77
    $ 249
    $ 415


The detail design phase on major capital components like the
metallurgical plant, vertical shaft and power reticulation continued until
construction commenced on these components and in certain instances integration
design of components could only be completed while construction was in progress.
The preferred LHS mining method has also resulted in an increase in the mining
equipment required to support the planned development and production rates.

Planned mine development rates were negatively influenced by
the interruptions caused by the lack of permanent power supply, excessive water
that had to be handled through temporary infrastructure and the cost of
recruitment of skilled labour from the host community. The slower rate of mine
development had a negative impact on the previously projected development costs.

The initial project capital expenditure has all but been
completed. Estimated project capital of $125 million is to be spent over the
next 8 years and sustaining capital of $343 million is currently estimated to be
required over the next 26 years (LOM).

28

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

TOTAL PROJECT
      CAPITALProject
      capital spent to December 31,
      2010
    Remaining
      project capital to be spent over
      LOM
    Total
      project capital
    Sustaining
      capex
    Total
      project capitalCAD$
      (million)
    CAD$
      (million)
    CAD$
      (million)
    CAD$
      (million)
    CAD$
      (million)Process plant Mining equipment
      Vertical shaft Mine development Tailings
    114 
      36 74 91
      11
    9 
      8 5 104 -
    123 
      44 79 195
      11
    - 
      203 - 139 -
    123 
      247 79 334
      11Total capital costs Pre-production
      operating costs
    326 
      89
    125 
      -
    452 
      89
    343 
      -
    794 
    89Total project capital
    415
    125
    540
    343
    883Cost per oz (ZAR7.22) Cost per oz
      (ZAR8.00)
    65 59
    20 18
    85 77
    54 49
    141 128


Plans for fiscal 2011

Reef development remains the key to delivering the planned
production build-up and will therefore be the priority focus for 2011. The 2011
production range of 110,000 to 140,000 oz of Au is therefore the result of the
increased focus on reef development. Cash costs for 2011 are forecast in the
range of US$520 US$620/oz which includes the impact of the diluted grade from
the additional reef development. Completion of remaining mine infrastructure,
above and below surface is also planned, which entails development on 40 and 41
level of the vertical shaft, close out of construction packages for the
metallurgical plant, surface infrastructure and the completion of permanent
power supply. The Company will also source, employ and train the necessary
workforce and purchase the remaining trackless equipment required. A total of
$90 - $100 million of capital is to be spent during 2011 with more than 90%
attributable to underground development to support the production profile for
the short to medium term. Meeting our production and development targets for
2011 will provide a solid foundation for the production target of 220,000 Au oz
for 2012 with the average LOM production of 254,000 Au oz to be reached in 2013.

|5.  | Exploration properties
|--- | ----------------------
|    |                       
|5.1 | Tanzania              

In Tanzania, exploration programs are being conducted in two
separate geological terrains, namely the Archean (2.7 -3.3 billion years old
Ga), greenstone-hosted, Lake Victoria Goldfields (north-west) and the
Proterozoic (2.2 -1.6 Ga) Lupa Goldfields (south-west). The Company also manages
a joint venture with African Barrick in the Geita Belt of the Lake Victoria
Goldfields.

The acquisition agreement entered into in 2008 provided for
additional Great Basin shares to be issued in the first three years from
closing, contingent upon gold discoveries above a threshold of 500,000 ounces in
size being made on certain mineral prospects held. In the event of such
discoveries, the Company would issue shares valued at the higher of closing
price on date of acquisition ($3.30) or then-prevailing market price to the
former owners on the basis of valuing these gold ounces at US$15/oz for inferred
resources and US$40/oz for measured and indicated resources (subject to a
minimum average cut-off grade of 1.5 grams per tonne or 0.04 oz per ton).

The Company also agreed to spend a minimum of $15 million and
up to a maximum of $27 million in terms of the agreement to explore the acquired properties
during the first three years from closing of the transaction on April 1, 2008.
The increased expenditure would also be contingent upon gold discoveries above a
threshold of 500,000 ounces in size being made on certain mineral prospects.

29

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|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

In connection with this contingent payment requirement, the
Company issued 3,073,773 shares in January 2010 with a total value of $5.5
million. During May 2010, the terms of the remaining liability were amended and
settled in full through the issuance of 7.5 million shares in June 2010, thus
eliminating any further discovery-contingent common share issuance requirements
as well as eliminating the mandatory exploration expenditure timetable. The
Company now holds all the prospects outright without further obligations in
terms of the acquisition agreement.

There remains a considerable amount of preliminary exploration
work still to be completed on these properties. A number of permits are held
that extend over significant strike extents of prospective structures, and which
still require systematic exploration and potentially follow-up drilling. This
process could ultimately allow a sizeable reduction of area of permits held.

An initial target prioritization exercise has been completed,
and this work continues to be supported with desk-top structural studies of
airborne magnetic data and integration of gravity, geochemical and drilling
data. The Imweru prospect (Geita West) remains a key follow-up target, with
extensive drilling required to fully evaluate the 9 kilometer long shear
corridor. Subject to orientation studies, Mobile Metals and Iron (MMI)
geochemical surveys are planned on a number of covered structural targets. The
Lupa Goldfield has also provided a number of follow-up targets, and work is
progressing to seek a balanced prioritization with drilling and trenching
programs to augment infill geochemical surveys.

|5.2 | Russia
|--- | ------

In addition, the Company owns mineral rights on the island of
Kurils (eastern Russia) where an initial phase of diamond drilling was done in
2008, aimed at establishing indicated mineral resources in the main project
area.

The Kurils Project in Russia still requires a significant
amount of phased exploration programs in order to generate a significant mineral
resource base. The Company plans to dispose of this property.

|5.3 | Mozambique
|--- | ----------

The Company holds an 80% interest in an unincorporated joint
venture with G S Minase Refnaria Limitade (GSR) in Mozambique. The purpose of
the joint venture is to establish a gold exploration and mining business in
Mozambique, whereby the Company will have the exclusive right to explore all
GSRs properties.

GSR currently owns the 17 square kilometer Tsetsera Property.
The property was worked historically by artisanal miners, who crushed quartz
vein material and panned gold from the fines. The artisanal miners have exposed
over 985 feet (300 meters) strike length of quartz veins, 5 to 60 cm in width,
within a phyllite (strongly metamorphosed sediments).

An initial soil sampling and ground geophysics program was
completed on the property during 2008. A shear corridor in excess of 8,200 feet
(2,500 meters) in strike and 1,310 feet (400 meters) in width has been
identified for follow-up investigation. Although the project was placed on care
and maintenance during 2009, a decision has since been made to continue with the
joint venture.

|6. | Market Trends
|-- | -------------

Gold opened at US$1,087 on January 4, 2010 and generally traded
upwards from this point during the year fuelled by an increased demand and
continuous concern regarding stability and growth in the Global economy. Gold
traded at a cumulative average price of US$1,225 during the year and closed at a
record high of US$1,421 on November 9, 2010. We saw some volatility
during November and December with gold trading as low as US$1,337 on November
17, 2010 and again up to US$1,420 by December 7, 2010 before it closed at
US$1,405 on December 31, 2010. The volatility continued into 2011 with gold prices declining to US$1,319 on January 28, 2011 but recovering to close at US$1,420 on March 1, 2011. The volatility and increase in early 2011 is driven by the political unrest in the Middle-East and North Africa with gold again seen as the “safe-haven” investment.

30

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|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

The price of silver also impacts on the revenue and earnings of the Company, although to a lesser extent than the price of gold. Included in revenue is 400,895 Ag oz sold from trial mining activities at Hollister. Silver opened on January 4, 2010 at US$17.17 and traded at a cumulative average of US$20.19 during the year before closing on US$30.63. Silver prices continued to rise in 2011 and closed as high as US$34.37 on March 1, 2011.

Good progress with the completion of the Burnstone capital
project and imminent production from this project as well as the continued
improvement in all areas at our Hollister project has had a significant impact
on the Companys share price during the year. After opening at $1.81 on January
4, 2010 the share price increased to $3.33 on November 9, 2010 and closed at
$2.95 on December 31, 2010, an increase of 63% during the year. The volatility
of the gold price seen in early 2011 as well as the bought deal public offering
closed on February 23, 2011 impacted on our share price in early 2011 with an
average trading price of $2.65 achieved up to March 1, 2011.

The exchange rate between the US$, $ and the South African Rand
(ZAR) impacts on the Companys earnings and cash flow. The ZAR opened at R7.39
against the US$ on January 1, 2010 and weakened to R7.96 in May 2010. The ZAR
strengthened in the second half of 2010 and after trading at an average exchange
rate of US$1 = R7.32 during the year it closed at US$1 = R6.62 on December 31,
2010. The ZAR showed some weakness against the US$ in early 2011 but recovered
again to levels below US$1 = ZAR7 against the USD by end of February 2011.The
US$ and $ traded at an average of US$1 = $1.03 during the year with a
strengthening in the $ to US$1 = $0.97 in early 2011.

|7. | Selected Annual and Quarterly
      Information
|-- | -----------------------------------------------

In thousands of Canadian dollars, except per-share figures and
number of shares. Small differences arise from rounding.

|                                                     | As at and for
      the years ended
|---------------------------------------------------- | -----------------------------------
|                                                     | December 31 2010                   
|Current assets                                       | $ 41,918                           
|Mineral properties                                   | 245,650                            
|Other assets                                         | 530,475                            
|Total assets                                         | 818,043                            
|Current liabilities                                  | 115,526                            
|Future income taxes and other liabilities            | 193,080                            
|Shareholders equity                                 | 509,437                            
|Total liabilities and shareholders
      equity     | 818,043                            
|Working capital1(deficit)                            | $ (21,097)                         
|Revenue                                              | 99,706                             
|Expenses                                             | (128,796)                          
|Loss for the year                                    | $ (28,912)                         
|Basic loss per share                                 | $ (0.08)                           
|Weighted average number of common shares outstanding |                                    
|(thousands)                                          | 358,711                            

31

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

|                      | Dec 31 2010 | Sept 30 2010 | Jun 30 2010 | Mar 31 2010 | Dec 31 2009 | Sept 30 2009 | Jun 30 2009 | Mar 31 2009
|--------------------- | ----------- | ------------ | ----------- | ----------- | ----------- | ------------ | ----------- | -----------
|Current assets        | 41,918      | 60,102       | 84,904      | 92,6132     | 126,8622    | 78,8542      | 131,5452    | 168,9372   
|Mineral properties    | 245,650     | 246,798      | 244,998     | 223,864     | 222,919     | 254,648      | 257,247     | 257,639    
|Other assets          | 530,475     | 435,012      | 333,284     | 240,8882    | 198,5032    | 157,3452     | 123,5922    | 71,8842    
|Total assets          | 818,043     | 741,912      | 663,186     | 557,365     | 548,284     | 490,847      | 512,384     | 498,460    
|Current liabilities   | 115,526     | 87,352       | 89,467      | 60,295      | 72,974      | 27,324       | 25,369      | 18,881     
|Future income taxes   | 193,080     | 236,085      | 189,946     | 133,071     | 101,597     | 86,527       | 90,570      | 82,844     
|and other liabilities |             |              |             |             |             |              |             |            
|Shareholders equity  | 509,437     | 418,475      | 386,773     | 363,999     | 373,713     | 376,996      | 396,445     | 396,735    
|Total liabilities and |             |              |             |             |             |              |             |            
|shareholders equity  | 818,043     | 741,912      | 663,186     | 557,365     | 548,284     | 490,847      | 512,384     | 498,460    
|Working (deficit)     |             |              |             |             |             |              |             |            
|capital1              | (21,097)    | (19,821)     | 15,400      | 48,987      | 91,624      | 47,7282      | 98,5912     | 145,1372   
|Revenue               | 42,714      | 12,230       | 37,940      | 6,822       | -           | -            | 21,876      | 11,861     
|Expenses              | (36,171)    | (35,951)     | (43,340)    | (13,334)    | (8,365)     | (16,382)     | (35,492)    | (21,944)   
|Profit (loss) for the |             |              |             |             |             |              |             |            
|period                | 6,721       | (23,721)     | (5,400)     | (6,512)     | (8,365)     | (16,382)     | (13,616)    | (10,083)   
|Basic earnings (loss) |             |              |             |             |             |              |             |            
|per share             | $0.02       | ($0.07)      | ($0.02)     | ($0.02)     | ($0.03)     | ($0.05)      | ($0.04)     | ($0.04)    
|Weighted average      |             |              |             |             |             |              |             |            
|number of common      |             |              |             |             |             |              |             |            
|shares outstanding    |             |              |             |             |             |              |             |            
|(thousands)           | 405,857     | 351,739      | 340,609     | 336,983     | 333,856     | 333,531      | 333,215     | 238,364    



1Working capital includes cash and cash
receivables, accounts receivable, inventory and accounts payable and is
considered a non-GAAP measure.2Certain prior historical amounts
have been reclassified to conform to fiscal 2010 and 2009 year presentation.
These reclassifications had no impact on previously reported results of
operations or shareholders' equity.

The Companys loss per share has generally been decreasing on a
quarterly basis from $0.05 to earnings of $0.02 per quarter in Q4 2010. The
third quarter 2010 loss was burdened by some unusual items including an
unrealized mark-to-mark hedge loss ($7.3 million), revenue and cost adjustments
due to final toll milling reconciliations and an ore stockpile adjustment
(together $7.1 million) but, excluding these items, the per share loss would
have been $0.03. The generally decreasing losses are attributable to the
increased gold sale proceeds from trial mining at Hollister, which benefited
from higher gold prices and increased production. The Company also has an
aggressive cost management project aimed at reducing the costs of the trial
mining, as well as exploration and general corporate expenses. Pre-development
expenditures at Hollister have been decreasing in line with the optimized mine
designs and stoping techniques. All development costs relating to Burnstone have
been capitalized in 2009 and 2010.

|8. | Off-Balance Sheet Arrangements
|-- | ------------------------------

(a) Financial guarantee

BEE legislation in South Africa requires a target of 26%
ownership in the Companys South African projects by historically disadvantaged
South Africans by 2014. In order to comply with this legislation, Tranter
Burnstone (Pty) Ltd. (Tranter), a BEE company, acquired 19,938,650 treasury
common shares for $38 million in 2007, which was deemed equivalent to the 26%
underlying value of Burnstone. Tranter borrowed the funds from Investec Bank Ltd
(Investec), a South African bank, to purchase the shares and Great Basin gave
a loan guarantee in favour of Tranter initially limited to ZAR80 ($12 million)
million.

Subsequently the Company, through Southgold agreed with
Investec to increase the guarantee to ZAR140 million ($21 million) to cover any
shortfall in interest or principal repayments on the loan outstanding by Tranter
to Investec. This revised agreement required Southgold to increase the balance
in the security call deposit to $12 million (ZAR80 million) and allowed for
these funds to be utilized towards any advances required to be made to Tranter under the guarantee agreement. A
loan of $13 million (ZAR 88 million) was advanced to Tranter in October 2010
under the guarantee agreement to enable Tranter to meet its interest payment
obligation to Investec. The amount set aside in the security call deposit was
used to partially fulfill this obligation.

32

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

As a result of this loan the remaining Tranter guarantee is now
reduced to $6.9 million (ZAR52 million). Any advances to Tranter under this
guarantee are due to be repaid by Tranter in installments from 2014 to 2017,
with interest accruing at the South African prime interest rate plus 2%.
Security for any advances made pursuant to this guarantee includes a second
charge against any shares of the Company held by Tranter (second to
Investec).

The fair value of the guarantee is determined by reference to
the Companys exposure to potential future losses under the guarantee. The
probability of future losses under the guarantee agreement, and therefore the
fair value of the guarantee, is dependent on the estimated fair value of the
security granted by Tranter on grant date of the guarantee. Future assessments
are not required unless a change to the contractual relationship results in a
change in fair value.

(b) Hedging program

In connection with the term facility agreement entered into in
2010, the Company executed a ZCC hedging program for a total of 105,000 gold
ounces over a period of three years.

As of January 1, 2011, the Company is required to deliver 1,250
gold ounces per month over a twelve month period. The remaining 90,000 gold
ounces will be delivered in 24 equal monthly deliveries of 3,750 gold ounces,
starting January 1, 2012. The program includes put options priced at US$850 and
call options priced at US$1,705 per Au eqv oz.

The fair value on inception and subsequent mark-to-market
movements were calculated using an option pricing model with inputs based on the
following assumptions:

August 13
      2010
    December 31
      2010Gold price (per ounce) Risk free
      interest rate Expected life Gold price volatility
    US$1,216 0.58% - 1.04%
      5  40 months 21.9% - 27.8%
    US$1,419 0.25% - 1.34%
      1 - 36 months 17.3% - 27%


|9. | Contractual obligations
|-- | -----------------------

Payments due by period
      (CAD millions)Total
      (million)
    Less than one year
      (million)
    1 to 5 years
      (million)
    More than 5 years
      (million)Exploration commitment Environmental
      commitment Senior secured notes Convertible debentures Term
      facility agreement Finance lease liability Operating lease
      obligations
    $ 1.7 
      1.0 55.4
      166.5 80.0 8.2 0.4
    $ Nil 
      0.2 55.4
      10.1 10.4 7.8 0.2
    $ 1.7 
      0.4 Nil
      156.4 69.6 0.4 0.2
    $ Nil 
      0.4 Nil Nil
      Nil Nil NilTotal
    $ 313.2
    $ 84.1
    $ 228.7
    $ 0.4


Senior secured notes

41,575 Notes remain outstanding on December 31, 2010. These
Notes bear interest at 14% per annum and are repayable on or before December 12,
2011. The Notes are guaranteed on a joint and several basis by all of the
Companys Nevada subsidiaries and secured by their assets. These notes will be
settled on March 15, 2011 with the proceeds from the new Term finance loan
from Credit Suisse. The Term loan will be repayable over 4 years.

33

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

Convertible debentures

The Debentures mature on November 30, 2014 and bear interest at
the rate of 8% per annum. Interest is payable semi-annually in arrears on May 30
and November 30 of each year. The Debentures are direct senior unsecured
obligations of the Company and are guaranteed by certain of the Companys
subsidiaries.

Term facility agreement

The $74 million (US$72 million) term facility agreement (“the facility”) has a maximum term of 4 years from date of draw down and will be repaid in 13 quarterly consecutive installments, commencing on May 26, 2011, 12 months after the draw down. The facility bears interest at a margin of 4% over the US LIBOR rate. The Company has the option to retire the loan 12 months after draw down at no additional cost. The Burnstone project and certain subsidiary guarantees serve as security for the facility.

Finance lease liability

The principal debt amounts will be repaid in equal monthly
installments over a period of 12 to 13 months and bear interest at rates between
6.5% and 22.4% on outstanding capital. The finance leases are collateralized by
the leased assets which had a carrying value of $9 million at December 31,
2010.

|10. | Transactions with Related Parties
|--- | ---------------------------------

Related party transactions are recorded at the exchange amount
which is the amount of consideration paid or received as agreed to by the
parties. On October 1, 2010 the Company advanced $13 million (ZAR88 million) on
a loan to Tranter in terms of the guarantee agreement, with the proceeds to be
used by Tranter to settle its obligations due under its agreement with Investec.
The funds disclosed as restricted cash on the Consolidated Balance sheet for
September 30, 2010 were applied to this loan, with the Company advancing the
shortfall of $1 million (refer section 8). There were no other material related
party transactions during the quarter.

Information relating to the Companys related party
transactions is available in the Companys annual financial statements which are
available on SEDAR at www.sedar.com.

|11. | Critical Accounting Estimates
|--- | -----------------------------

The Company's accounting policies are presented in note 3 of
the most recent annual consolidated financial statements and a description of
changes in accounting policies is set out in section 13 of this document.

The preparation of consolidated financial statements in
accordance with generally accepted accounting principles requires management to
select accounting policies and make estimates. Such estimates may have a
significant impact on the financial statements.

These estimates include:

- mineral resources and reserves
- the carrying value of mineral properties,
- the allocation of purchase price consideration to the fair value of
  identifiable assets and liabilities acquired,

34

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|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

- the carrying values of property, plant and equipment,
- the determination of amortization, depletion and accretion,
- the valuation of inventories,
- the valuation of stock-based compensation expense,
- the estimation of asset retirement obligations,
- the valuation of warrants and derivatives,
- the determination of valuation allowance for future income taxes,
- the determination of fair values of financial instruments,
- the estimated market related interest rate used to calculate the equity
  component of compound financial instruments, and
- the allocation of indirect mining and overhead expenses to production and
  development costs.

Actual amounts could differ from the estimates used and,
accordingly, affect the results of operations.

Mineral resources and reserves, the carrying values of
mineral properties, and of property, plant and equipment as well as the
allocation of purchase price consideration to the fair value of identifiable
assets and liabilities acquired and determination of amortization and
depletion.

Mineral resources and reserves are estimated by professional
geologists and engineers in accordance with recognized industry, professional
and regulatory standards. These estimates require inputs such as future metal
prices, future operating costs, and various technical geological, engineering,
and construction parameters. Changes in any of these inputs could cause a
significant change in the estimated resources and reserves, which in turn could
have a material effect on the carrying value of property, plant and
equipment.

The carrying value of mineral properties is also dependant on
the valuation used for the common shares and warrants of the Company issued for
the acquisition of mineral properties.

The value of the common shares issued is the fair market value,
based on the trading price of the shares at the agreement and announcement date,
pursuant to the terms of the relevant agreement. The Company uses the
Black-Scholes pricing model to estimate a value for the warrants issued upon the
acquisition of a property. This model, and other models which are used to value
options and warrants, require inputs such as expected volatility, expected life
to exercise, and interest rates. Changes in any of these inputs could cause a
significant change in the carrying value initially recorded for mineral
properties.

The carrying value of property, plant and equipment are
considered in terms of the remaining useful life of the particular asset. These
estimates are prepared by engineers in accordance with their knowledge and
experience in the mining industry. Re-assessment of the remaining useful life
could cause a significant change in the carrying value initially recorded for
property, plant and equipment.

Inventories and the allocation of indirect mining and
overhead expenses to production and development costs.

Inventories are measured at the lower of cost or net realizable
value. Net realizable value is the estimated selling price in the ordinary
course of business less the estimated cost of completion and the estimated cost
necessary to perform the sale. Production costs include allocated overhead
expenses and constitute the cost of an inventory item. The determination of
estimated selling prices, estimated completion and selling costs, and cost
allocations are done by management in accordance with their knowledge and
experience in the mining industry. Changes in any of these factors could cause a
significant change in the inventory valuation in a period.

35

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|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

Site reclamation costs (asset retirement obligations) and
the determination of accretion

Upon the completion of any mining activities, the Company will
ordinarily be required to undertake environmental reclamation activities in
accordance with local and/or industry standards. The estimated costs of these
reclamation activities are dependent on labour costs, the environmental impact
of the Company's operations, the effectiveness of the chosen reclamation
techniques, and applicable government environmental standards. Changes in any of
these factors could cause a significant change in the reclamation expense and
accretion charged in a period.

Stock-based compensation expense

From time to time, the Company grants share purchase options to
directors, employees, and service providers. The Company uses the Black-Scholes
option pricing model to estimate a value for these options. This model, and
other models which are used to value options, require inputs such as expected
volatility, expected life to exercise, and interest rates. Changes in any of
these inputs could cause a significant change in the stock-based compensation
expense charged in a period.

Warrants

The Company from time to time may grant share purchase warrants
as part of its capital raising and under the conclusion of business
transactions. The Company uses the Black-Scholes option pricing model to
estimate a value for these warrants. This model, and other models which are used
to value the warrants, require inputs such as expected volatility, expected life
to exercise, and interest rates. Changes in any of these inputs could cause a
significant change in the fair value attributed to warrants issued in a
period.

Future income taxes

Future income tax assets and liabilities are computed based on
differences between the carrying amount of existing assets and liabilities on
the balance sheet and their corresponding tax values, using the substantively
enacted income tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
Future income tax assets also result from unused loss carry forwards and other
deductions. Future tax assets are recognized to the extent that they are
considered more likely than not to be realized. The carrying value of future
income tax assets is adjusted, if necessary, by the use of a valuation allowance
to reflect the estimated realizable amount.

Financial instruments

If the value for a financial instrument cannot be obtained from
an active market, the Company establishes fair value by using valuation
techniques. These include the use of recent arms length transactions, reference
to other instruments that are substantially the same, discounted cash flow
analysis, estimated market related interest rates, and option pricing models
refined to reflect the issuers specific circumstances. Changes in any of these
inputs could cause a significant change in the fair value of the financial
instruments in a period.

|12. | Adoption of new Accounting Policies
|--- | -----------------------------------

Accounting standard updates issued by the Canadian Institute of
Chartered Accountants (CICA) which are effective for 2010 are considered to be
not applicable to the Company, nor will it have any impact on the Companys
consolidated financial statements.

|13. | New accounting pronouncements
|--- | -----------------------------

The Company converted to International Financial Reporting
Standards (IFRS) effective January 1, 2011 and amendments to standards issued
by the Canadian Institute of Chartered Accountants (CICA) would therefore not
affect the financial disclosures and results of operations of the Company for
interim and annual periods beginning January 1, 2011.

36

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|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

|14. | Financial Instruments
|--- | ---------------------

The Companys investment in Kryso Resources Plc (Kryso)
shares and warrants, were respectively classified as available-for-sale and
held-for-trading financial instruments. These instruments were carried at fair
value. Unrealized gains and losses from changes in the fair value of
available-for-sale financial instruments were recognized in the statement of
operations and comprehensive loss under other comprehensive loss, whilst fair
value changes on held-for-trading financial instruments were recognized in the
statement of operations and comprehensive loss.

The Company disposed of its entire investment in Kryso during
June 2010 for net proceeds of $3.5 million (GBP2.2 million). At disposal date
the carrying value of the investment was $5.6 million (GBP3.6 million), which
was calculated based on the closing price of GBP15.15 pence per share and an
exchange rate of $1.55:1GBP.

The Company reversed unrealized fair value gains of $2.6
million (GBP1.7 million) and $1.1 million foreign exchange losses from other
comprehensive income to current loss, resulting in a net realized gain of $0.5
million (GBP0.3 million) and $1.1 million foreign exchange loss being recorded
in current loss. The Companys investment in Kryso warrants was disposed for net
proceeds of $0.1 million (GBP0.07 million), resulting in a net loss of $0.07
million (GBP0.04 million) recognized in current loss. The warrants were carried
at fair value.

Refer to section 8 above for information relating to the fair
value of financial guarantees and hedge structures and note 22 of the financial
statements for a summary of the Companys remaining financial assets and
liabilities.

|15. | Other
|--- | -----

Additional information relating to the Company, including the
Company's Annual Information Form, is available on SEDAR at www.sedar.com.

|15.1 | International financial reporting standards
      (IFRS)
|---- | ----------------------------------------------------------

The Company has converted its accounting framework to
International Financial Reporting Standards (IFRS) on January 1, 2011.

The Company’s IFRS conversion project began during 2009. A formal project plan, governance structure and a project team, including an external advisor, were established. The project philosophy was to align with current accounting practices and to minimize, where possible, the impact of any changes to the business. Regular reporting was provided to senior management and the Audit Committee of the Board of Directors.

The IFRS conversion project consisted of four phases:
diagnostic; design and planning; implementation; and post implementation. The
major variances identified and adjusted include the valuation of compound
financial instruments, accounting for property, plant and equipment, the effects
of changes in foreign currency exchange rates and alternatives available under
IFRS 1  First Time Adoption of IFRS. The conversion to IFRS has had a
relatively low impact on the financial record keeping, internal control and
financial disclosure of the Company due to the historical exploration and
project development nature of the Companys business. Accounting systems have
been assessed and re-configured to ensure accurate reporting under IFRS, both
internally and externally. The Companys key financial staff has been trained in
IFRS and the majority of them have been exposed to reporting under IFRS for five
years or more. The adoption of IFRS principles has not had a material effect on
the manner in which the Company reports its accounts.

37

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

|15.2 | Disclosure of Outstanding Share Data
|---- | ------------------------------------

The following details the share capital structure as at March
14, 2011. These figures may be subject to minor accounting adjustments prior to
presentation in future consolidated financial statements.

Share Capital
      StructureEquity type
    Expiry date
    Exercise price
    Number granted
      (thousands)
    Total
      (thousands)Common shares
    
    
    
    452,183Share purchase options
    March 31, 2011 April 30,
      2011 May 21, 2011 August 18, 2011 October 30, 2011
      December 11, 2011 February 11, 2012 April 18, 2012 July
      15, 2012 October 9, 2012 February 10, 2013 March 26, 2013
      April 10, 2013 August 3, 2013 November 9, 2013 December
      11, 2013 January 14, 2014 March 11, 2014 February 11, 2014
      April 12, 2014 July 15, 2014 March 26, 2015 March 11, 2016
    $3.57 $2.45 $3.47
      $2.78 $1.50 $1.25 $1.75 $2.68 $1.49 $1.65
      $1.78 $1.74 $3.60 $1.81 $2.96 $1.25 $1.35
      $2.46 $1.75 $1.49 $1.49 $1.74 $2.46
    90 450 150 220
      114 1,607 1,650 90 333 295 660 2,461
      110 1,107 450 255 825 5,580 690 2,380
      100 1,500 1,475
    22,592Warrants
    December 12, 2011
    $1.25
    21,068
    21,068Convertible debentures
    November 30, 2014
    $2.15
    58,837
    58,837Fully diluted shares
    
    
    
    554,680


|15.3 | Non GAAP measures
|---- | -----------------

The Company makes reference to certain non-GAAP measures in its
reporting and believes that these measures, in addition to conventional measures
prepared in accordance with GAAP, are used by certain investors to evaluate the
Companys performance and ability to generate cash flow. Accordingly, these
measures are intended to provide additional information and should not be
considered in isolation or as a substitute for measures of performance prepared
in accordance with GAAP.

Cash production cost

The Company reports cash cost of ounces sold. In the gold
mining industry, this is a common performance measure but does not have any
standardized meaning. Cash production cost includes direct development, mining,
royalties and processing costs incurred in the recovery of and disposal of Au
and Ag as well as allocated overhead charges.

The reconciliation of production cost to cash production cost
is presented below:

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|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

3 months
      ended
    12 months
      endedDecember 31,
      2010 ($000)
    December 31,
      2009 ($000)
    December 31,
      2010 ($000)
    December 31,
      2009 ($000)Production cost relating to metal produced
      by the Nevada operations Less amortization and non-cash overhead costs
      included in production cost.
    $ 23,858 (1,853)
    - -
    $ 47,483 (964)
    - -Total cash production costs for the
      period
    $22,005
    -
    $ 46,519
    -Gold equivalent ounces sold Ore tons
      milled related to ounces sold Cash production cost per Au eqv oz sold
      Cash production cost per ton sold
    31,911 39,087 $690
      $563
    - - - -
    62,604 79,010 $743
      $589
    - - - -


Adjusted loss per share

Adjusted loss per share is used by the Company to compare
quarterly and annual results on a sustaining basis by eliminating certain fair
value adjustments and out of the ordinary expenses incurred. The reconciliation
of loss per share to adjusted loss per share is presented below :

3 months
      ended
    12 months
      endedDecember 31,
      2010 ($000)
    December 31,
      2009 ($000)
    December 31,
      2010 ($000)
    December 31,
      2009 ($000)Profit (loss) for the period Net
      unrealized loss on held-for-trading financial instruments Net
      unrealized market-to-market adjustment on held-for-trading financial
      instruments
    $ 6,721 - 3,161
    ($8,365) - -
    ($28,912) 3,606 6,860
    ($48,446) - -Adjusted profit (loss) for the
      period
    $9,882
    ($8,365)
    ($18,446)
    ($48,446)Weighted average number of common shares
      outstanding (000) Adjusted earnings (loss) per share
    405,857 $0.02
    333,856 ($0.03)
    358,711 ($0.05)
    310,068 ($0.16)


|15.4 | Reconciliation of Use of Proceeds from March
      2009 Offering
|---- | ----------------------------------------------------------------

In March 2009, the Company undertook an offering of $149.5
million (including a 15% over-allotment option) of units consisting of one
common share and one-half of one common share purchase warrant with net proceeds
(after deducting underwriters fees and expenses) of $139 million. The following
table sets out a comparison of how the Company used the proceeds during the 11
month period following the closing date in March 2009, an explanation of
variances and the impact of variances on the ability of the Company to achieve
its business objectives and milestones.

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|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

Intended Use of proceeds
      of March 2009 Offering CAD$
    Actual Use of
      Proceeds from March 2009 Offering and Explanation of
      Variance and impact on business objectives
    (Over)/under
      expenditureOffering expenses
    $1.6 million
    Offering expenses
    $1.6 million
    N/AUnderwriting fee
    $8.9 million
    Underwriting fee
    $8.9 million
    N/ABurnstone Property Mine
      development, surface development and engineering
    $ 28 million
    Mine development
    $36 million
    ($8 million)Mining equipment
    $ 23 million
    Mining equipment
    $ 9 million
    $14 millionVertical shaft
    $ 26 million
    Vertical shaft
    $27 million
    ($1 million)Metallurgical plant
    $ 26 million
    Metallurgical plant
    $19 million
    $7 millionProduction costs
    $13 million
    Production costs
    $18 million
    ($5 million)Corporate overhead cost (assumes
      approximately $1 million spent per month)
    $4.5 million
    Corporate overhead cost
    $15 million
    ($10.5 million)General working capital (over-
      allotment proceeds were not allocated)
    $18.5 million
    Exploration General
      working capital
    $9 million $9.5
      million
    N/ATotal
    $149.5 million
    Total
    $153 million
    ($3.5 million)Explanation of variances and the impact of variances on
      the ability of the Company to achieve its business objectives and
      milestones
    Cost increases resulted from delays, exchange rates,
      price inflation and some construction inefficiencies due to fast tracking.
      Planned mine development rates were negatively influenced by the
      interruptions caused by the lack of permanent power supply, excessive
      water that had to be handled through temporary infrastructure and the cost
      of recruitment of skilled labour from the local community. The slower than
      anticipated rate of mine development had a negative impact on
      pre-production costs and also postponed the procurement of mining
      equipment. The net result of these variances was a 7 month delay in
      reaching commencement of production (originally estimated to commence by
      June 30, 2010) and a shortfall in the funds needed to complete the planned
      mine development, requiring the Company to undertake the bought deal
      public offering in February 2011.


|15.5 | Reconciliation of Use of Proceeds from
      November 2009 Offering
|---- | -------------------------------------------------------------------

In November 2009, the Company undertook an offering of $126.5
million principal amount of senior unsecured convertible debentures (including
over-allotment option) when it became evident that the planned project finance
facility would not be available in time. The following table sets out a
comparison of how the Company used the net proceeds (after deducting
underwriters fees and expenses) of $121 million during the four and a half
month period following the closing date in November 2009, an explanation of
variances and the impact of variances on the ability of the Company to achieve
its business objectives and milestones.

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

Intended Use of proceeds
      of November 2009 Offering CAD$
    Actual Use of
      Proceeds from November 2009 Offering and Explanation of
      Variance and impact on business objectives
    (Over)/under
      expenditureOffering expenses
    $ 0.4 million
    Offering expenses
    $ 0.4 million
    N/AUnderwriting fee
    $ 5.1 million
    Underwriting fee
    $ 5.1 million
    N/ARepayment of project finance credit
      facility
    $ 32 million
    Repayment of project
      
      finance credit facility
    $ 32.8 million
    ($ 0.8 million)Development of Burnstone Property
      to commence commercial production
    $ 89 million
    Development of 
      Burnstone
      property to commence commercial production
    $ 91 million
    ($ 2 million)Total
    
    Total
    $ 129.3 million
    ($ 2.8 million)Explanation of variances and the impact of variances on
      the ability of the Company to achieve its business objectives and
      milestones.
    Capital cost increases resulted because the detail design
      phase on major capital components such as the metallurgical plant,
      vertical shaft and power reticulation was ongoing right up until
      construction commenced on these components and in certain instances
      integration design of components could only be completed while
      construction was in progress. The fact that design work was not completed
      well in advance of construction resulted in some inefficiencies and the
      need to revise work already completed. This resulted in capital cost
      increases over the capital estimates included in the 2009 technical
      reports. The preferred LHS mining method has also resulted in an increase
      in the mining equipment required to support the planned development and
      production rates. The increase in capital costs was manageable because the
      Company augmented the proceeds of the November 2009 offering with a US$72
      million loan facility from Credit Suisse AG and also applied the majority
      of the proceeds from the exercise of the warrants issued with the March
      2009 offering towards completion of the capital projects at Burnstone to
      enable production to commence by January 2011.


|15.6 | Disclosure Controls and Procedures
|---- | ----------------------------------

The Chief Executive Officer (CEO) and Chief Financial Officer
(CFO) are responsible for establishing and maintaining adequate disclosure
controls and procedures. Disclosure controls and procedures are designed to
ensure that information required to be disclosed in the Companys filings under
securities legislation is accumulated and communicated to management, including
the CEO and CFO as appropriate, to allow timely decisions regarding public
disclosure. They are designed to provide reasonable assurance that all
information required to be disclosed in these filings is recorded, processed,
summarized and reported within the time periods specified in securities
legislation. The Company evaluates its disclosure controls and procedures
annually.

Under the supervision of our CEO and CFO, management conducted
an evaluation of the effectiveness of our disclosure controls and procedures as
at December 31, 2010. Based on this evaluation, our Chief Executive Officer and
the Chief Financial Officer have concluded that, as at December 31, 2010, our
disclosure controls and procedures were effective to provide reasonable
assurance that information required to be disclosed by us in our annual filings,
interim filings or other reports that we file or submit under applicable
securities legislation is recorded, processed, summarized and reported within
the time periods specified in such legislation and that these controls
and procedures also provide reasonable assurance that material information
relating to us is made known to our CEO and CFO by others.

41

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|                                    
|------------------------------------
|MANAGEMENT'S DISCUSSION AND ANALYSIS
|                                    
|YEAR ENDED
      DECEMBER 31, 2010  

It should be noted that while our officers believe that our
disclosure controls and procedures provide a reasonable level of assurance with
regard to their effectiveness, they do not expect that the disclosure controls
and procedures or internal controls over financial reporting will prevent all
errors and fraud. A control system, no matter how well conceived or operated,
can only provide reasonable, but not absolute, assurance that the objectives of
the control system are met.

|15.7 | Internal Control over Financial
      Reporting
|---- | -----------------------------------------------

Management is responsible for establishing and maintaining
adequate internal control over financial reporting to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with GAAP. Internal
control over financial reporting includes those policies and procedures that:
(1) pertain to the maintenance of records that in reasonable detail accurately
and fairly reflect the transactions and dispositions of the assets of the
Company, (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with GAAP,
and that receipts and expenditures of the Company are being made only in
accordance with authorizations of management and directors of the Company, and
(3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Companys assets that could
have a material effect on the financial statements.

Under the supervision of our CEO and our CFO, management
conducted an evaluation of the effectiveness of our internal control over
financial reporting as at December 31, 2010 based on the framework and criteria
established in Internal Control  Integrated Framework, issued by the Committee
of Sponsoring Organizations of the Treadway Commission. Based on this
evaluation, our Chief Executive Officer and our Chief Financial Officer
concluded that our internal control over financial reporting was effective as of
December 31, 2010 to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements in accordance
with GAAP.

During the year the Company has designed and implemented
relevant internal controls in response to the Companys transition from
developer to producer with further internal controls to be implemented during
2011 in response to the Burnstone production build-up. These include new
internal controls addressing revenue recognition, inventory and production
costs, depletion, depreciation and development costs incurred following
commencement of commercial production. The implementation of these internal
controls over financial reporting will have a material impact and are reasonably
likely to affect our internal control over financial reporting.

42

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