---

MANAGEMENT'S DISCUSSION AND ANALYSIS**YEAR ENDED DECEMBER 31,
      2011**


|1.   | EXECUTIVE SUMMARY                                                   | 3 
|---- | ------------------------------------------------------------------- | --
|2.   | RESULTS OF
      OPERATIONS FOR THE FISCAL YEAR AND FOURTH QUARTER  | 6 
|3.   | FINANCIAL CONDITION REVIEW                                          | 9 
|4.   | OPERATIONS
      REVIEW                                             | 11
|4.1  | NEVADA OPERATIONS                                                   | 11
|4.2  | SOUTH AFRICAN
      OPERATIONS                                      | 16
|5.   | EXPLORATION PROPERTIES                                              | 20
|5.1  | TANZANIA                                                            | 20
|5.2  | RUSSIA                                                              | 22
|5.3  | MOZAMBIQUE                                                          | 22
|6.   | MARKET TRENDS                                                       | 23
|7.   | SELECTED
      ANNUAL AND QUARTERLY INFORMATION                     | 24
|8.   | OFF-BALANCE SHEET ARRANGEMENTS                                      | 25
|9.   | CONTRACTUAL
      OBLIGATIONS                                       | 26
|10.  | TRANSACTIONS WITH RELATED PARTIES                                   | 26
|11.  | CRITICAL
      ACCOUNTING ESTIMATES                                 | 27
|12.  | ADOPTION OF NEW ACCOUNTING POLICIES                                 | 29
|13.  | NEW ACCOUNTING
      PRONOUNCEMENTS                                 | 29
|14.  | FINANCIAL INSTRUMENTS                                               | 29
|15.  | OTHER                                                               | 31
|15.1 | INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)                | 31
|15.2 | DISCLOSURE OF
      OUTSTANDING SHARE DATA                          | 31
|15.3 | NON GAAP MEASURES                                                   | 32
|15.4 | RECONCILIATION
      OF USE OF PROCEEDS FROM FEBRUARY 2011 OFFERING | 34
|15.5 | DISCLOSURE CONTROLS AND PROCEDURES                                  | 35
|15.6 | INTERNAL
      CONTROL OVER FINANCIAL REPORTING                     | 36

1

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

|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 the Securities Act of 1933and Section 21E of the Securities 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/tonne is a not a generally accepted
      accounting principles ("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 operations. It is determined by
      dividing the relevant mining and processing costs including royalties by
      the ounces produced/tonnes milled in the period. There may be some
      variation in the method of computation of "cash cost per ounce/tonne" as
      determined by the Company compared with other mining companies. Cash costs
      per ounce/tonne 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. 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 and once-off
      transactions. We also make reference in our disclosures to working
      capital which is also a Non-GAAP measure and includes cash and cash
      equivalents, trade and other receivables, current inventories, trade
      payables and accrued liabilities. 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

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

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 2012 and 2013. 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, 2011 and 2010 which are prepared in accordance with International Financial
Reporting Standards (IFRS or GAAP) 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 30,
2012.

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

Highlights for the year included :

- Year on year increase of 27% in Au eqv oz produced and 70% increase in
  revenue
- Burnstone capital project completed with commercial production in February
  2011
- 42% increase in Au eqv oz recovered through our Esmeralda mill compared to
  2010
- $24 million in cash generated by operations compared to $3 million
  utilized by operations in 2010
- 54% improvement in adjusted loss per share year on year

12 months
      endedDecember 31
      2011
    December 31
      2010Recovered Au eqv oz
    120,971
    95,186Au eqv oz sold
    114,228
    88,789Realized Au eqv price
    $1,491
    $1,123Revenue ($000)
    $170,324
    $99,706Profit/(loss) from operating activities
      ($000)
    $1,514
    ($17,908)Net loss for the year ($000)
    ($17,737)
    ($27,141)Cash generated from (utilized by)
      operations ($000)
    $24,190
    ($2,725)Adjusted loss per share
    ($0.06)
    ($0.13)


Financial results

The Company recorded a 70% increase in revenue as a result of a
29% increase in Au eqv oz sold as well as a 33% increase in the realized Au
price. The increased revenue and improved operating margin allowed for much
improved results from operating activities which recorded a profit of $1.5
million compared to the loss of $17.9 million in 2010. Profit from operating
activities is expected to improve as production from our Burnstone mine
increases. Burnstone recorded a net operating loss of $15 million in 2011, the
first year of its production build-up. The interest expense recorded in earnings
for 2010 is net of $30.6 million interest capitalized to mine development while
our Burnstone mine was under construction. An impairment provision for $13.6
million was recorded against the loan advanced to our Black Economic Empowerment
(BEE) partner, Tranter Burnstone (Pty) Ltd, under the 2010 guarantee agreement
as a result of the decrease in the value of the shares our BEE partner owns in
the Company that serves as collateral for the advance. Loss on derivative
instruments include the $8.8 million loss on the advance settlement of the 2008
Senior Secured Notes in February 2011 as well as a net $21.2 fair value adjustment on the zero-cost-collar hedge structures entered
into as a result of the Term Loan facilities executed during 2011. Our Nevada
operations have demonstrated their ability to generate taxable earnings and
therefore recognized a net $49.7 million deferred tax asset on their unused tax
losses and resource pools.

3

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

Basic loss per share improved 50% from $0.08 in 2010 to $0.04
in 2011 but remains impacted by fair value adjustments and capitalized interest.
Adjusted loss per share eliminates the impact of these transactions and shows a
54% improvement from $0.13 loss per share in 2010 to $0.06 loss per share in
2011.

Hollister

The Nevada operations produced 97,610 Au eqv oz for the year
(2010: 95,186 Au eqv oz), compared to the forecast of 100,000 Au eqv oz for the
year. Fiscal 2011 was the first year that all material extracted from trial
mining activities was processed at our Esmeralda mill, which showed a marked
improvement in Au recovery from 2010, increasing from 82% to 92%. The
performance of the acid wash and carbon regeneration circuit, which was
commissioned during November 2011, has not yet reached planned levels and the
mill continues with the process of replacing carbon on a continuous basis which
in the short term impacts on the amount of Au eqv oz sold as well as the cash
costs reported. In an effort to mitigate the time delay in recognizing produced
metal as revenue and the insufficient capacity of local refiners, a shipment of
loaded carbon was sent to Rand Refinery in South Africa in late December 2011 at
an additional cost of approximately US$35 per Au eqv oz. Regular shipments of
carbon to Rand Refinery will continue until April 2012 when the improvements to
the acid wash and carbon regeneration circuit is expected to be completed. The
year-on-year cash costs decreased by 9% to US$674 per Au eqv oz which is only
marginally above the 2011 forecast of US$650 per Au eqv oz.

Additional emphasis on ore development is improving mining
flexibility with the availability of additional stopes allowing for improved
grade blending of extracted ore and more consistent performance on a monthly
basis during 2012. The completion of the Upper-Zone ramp now allows for easy
access for delineation drilling, with information obtained improving mine
planning and scheduling. The good operational performance from the Nevada
Operations is expected to continue in 2012, with production of 90,000 to 100,000
Au eqv oz at a cash cost of US$700  750 per Au eqv oz expected from trial
mining.

Burnstone

The production ramp up at Burnstone continued during 2011, with
ore development meters increasing by 149% from 1,167 metres in Q1,2011 to 2,900
meters in Q4,2011. Stoping square meters also increased by 77% from 3,760 in
Q1,2011 to 6,653 in Q4,2011. Results from the long hole stoping mining method
remain positive with stoping widths of approximately 80 cm being achieved on a
consistent basis. Improved dilution control on ore development is positively
impacting on the head grade of material delivered to the mill. Intersecting an
80 meter Graben fault in early 2011 as well as infrastructural challenges
experienced during the year significantly impacted on the first year of
production build-up at Burnstone. Due to the temporary water handling system
being unable to handle the volumes of water generated from the increasing mining
activities, underground flooding occurred in the latter part of 2011 and early
2012 which impacted on the advancement of development. This short term issue has
now been resolved following the upgrading of the temporary water handling
system. Additional pumps and backup pump columns are providing additional
capacity to not only reticulate the water, but also to transport service water
to all working ends, which will further improve rates of development and
stoping. Permanent water reticulation infrastructure is under construction for
completion in Q2,2012.

Total Au production for the year came to 23,361 Au ounces,
approximately 6,000 Au ounces less than the revised guidance of 30,000 ounces.

4

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

In-fill drilling comprising 19,051 meters from surface and
7,966 meters from underground was completed to January 31, 2012, increasing
confidence in the 24 to 30 months mine plan. No significant faults were
intersected over this period. In-fill drilling will continue over the medium to
longer term.

The Metallurgical Plant is performing in line with expectation
with 775,524 tonnes processed during 2011, an average of 65,000 tonnes per
month. Mill feed is controlled to account for the lower than planned ore from
development and stopes with the mill capacity being in excess of 145,000 tonnes
per month.

Due to the loss of ore development ends following the Graben
fault, a program to re-establish ore development ends commenced in Q2,2011 which
increased ore development ends from 2 in June 2011 to 38 by the end of February
2012. As the remaining 12 temporarily flooded ore development ends become
available during Q1,2012, the mine plans to meet its first development milestone
of 1,500 ore development meters per month in Q2,2012, allowing the mine to reach
its first production milestone of 22,000 sq meters of stoping and a production
rate in excess of 10,000 oz per month in early Q3,2012.

Following a review of the current production levels and
progress of underground development and infrastructure, the Company expects
Burnstone to produce between 90,000 to 100,000 Au oz at a cash cost of US$900 
US$1,000 per oz for the 2012 fiscal year. These cash cost targets represent a
marked improvement on the US$1,801 per oz achieved in 2011. As planned, the high
ratio of development to stoping ore will continue to impact on the head grade
delivered to the mill and cash costs for the balance of 2012.

Liquidity and funding

Net cash of $24.2 million was generated from operations during
2011, a marked improvement on the $2.7 million utilized by the operations in the
prior year. In addition capital expenditure reduced from $230 million in 2010 to
$159 million in 2011which reduced the net financing requirement during 2011 to
$135 million compared to $233 million in 2010. In order to ensure adequate
funding is available the Company executed 2 term loan facilities during 2011
with net proceeds, after settling existing debt and interest, of $36 million.
Equity related transactions which included a bought deal public offering in
February 2011 ($81 million) and warrants exercised ($29 million), contributed a
net $115 million to cash reserves. Cash flow from operations is expected to
increase during 2012 and beyond as our Burnstone mine increases its production
to designed levels. Burnstone is expected to be cash flow positive by Q3,2012
(using a gold price of US$1,650 and a US$/ZAR exchange rate of 7.5) with its
cash contribution to Group activities to increase in line with the production
build-up. To ensure the Company has adequate funds available to fund the
production build-up it launched and closed a $50 million bought deal public
offering in March 2012. (Refer to March 30, 2012 press release.)

Ferdi Dippenaar, Great Basin Gold President and CEO, commented:
Our Nevada operations continue to perform in line with its current
production potential by delivering a much improved set of results from trial
mining for 2011. We expect a similar performance for 2012. The planned
completion of the EIS during 2012 will allow the project to enter into
commercial production which will have a positive impact on cash costs and the
manner we report our earnings. Burnstone in its first year of production
build-up, made significant strides in 2011 but were constrained by unexpected
geological and infrastructural challenges. The continuing additional infill
drilling is mitigating the risk of a reoccurrence in the short to medium term.
Significant improvements are and have been made to the shaft and permanent
underground infrastructure during the last 3 months. The continued improvement
in ore development and stoping rates at Burnstone is reassuring, with more
improvement expected in the second quarter of 2012 to get to the planned
production levels.

5

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| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

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

Revenue

The table below provides a summary of Au eqv oz sold.

3 months
      ended
    12 months
      endedDecember 31
      2011
    September 30
      2011
    December 31
      2010
    December 31
      2011
    December 31
      2010Nevada operations
    17,603
    22,790
    31,911
    92,239
    62,604Third party milling (Nevada operations)
    -
    -
    389
    -
    26,185South African operations
    7,058
    6,518
    -
    21,989
    -Total Au eqv oz sold
    24,661
    29,308
    32,300
    114,228
    88,789


Au eqv oz sold for the quarter by our Nevada operations were
impacted by the time delay in processing the carbon through third party refiners
as well as the lower average contained Au eqv grade of tonnes trial mined.
Recovered metal not sold increased by 3,847 to 13,095 Au eqv oz during the
quarter. An agreement has been reached with Rand Refinery in South Africa to
treat the carbon until such time as the upgrade to the acid wash and carbon
regeneration circuit is completed which will allow for pouring dore at our
Esmeralda mill and eliminate the dependency on third party refiners (refer to
section 4.1 below for more detail on the upgrade and completion thereof). 100%
of metal sold by our Nevada operations in 2011 were recovered through our
Esmeralda mill, an increase of 29,635 Au eqv oz or 47%. The improved performance
of the Esmeralda mill eliminated the need for third party milling.

Our South African operation commenced commercial production in
February 2011 and sold 21,989 Au oz by December 31, 2011. Sales increased
quarter on quarter during 2011 with an 8% increase recorded in Q4 2011.

Included in revenue for the quarter is $3.2 million (YTD $15.1
million) derived from the sale of 107,950 Ag ounces (YTD 469,614 Ag ounces)
trial mined at our Hollister property.

Production costs

The following table provides a breakdown of the production
costs incurred.

3 months
      ended
    12 months
      endedDecember 31
      2011
    September 30
      2011
    December 31
      2010
    December 31
      2011
    December 31
      2010Nevada operations ($000)
    14,285
    15,070
    24,292
    60,827
    65,683South African operations ($000)
    14,345
    15,483
    -
    40,716
    -Total production costs ($000)
    28,630
    30,553
    24,292
    101,543
    65,683Cash production cost per Au eqv oz  Nevada
      operations
    $805
    $639
    $748
    $667
    $810Cash production cost per Au oz  South
      African operations
    $1,834
    $2,283
    -
    $1,821
    -


The increase in cash production costs for the Nevada operations
as compared to Q3,2011 is mainly due to the additional carbon transport costs
incurred as a result of sending the carbon to Rand Refinery as well as the lower
grade material processed during the quarter. Cash production costs per Au eqv oz
for the year ended December 31, 2011 improved 18% over the comparative period in
2010 as a result of the improved throughput, recoveries and the continued costs
management campaign.

6

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

Cash production costs for our South African operations reduced
by 20% to $1,834 (US$1,793/Au oz) during the quarter and are still impacted by
the low average grade of ore resulting from the high ratio of development ore to
stoping material being processed as well as the lower volumes than planned from
stoping being mined and processed. Improvements in cost per ounce are expected
as the grade increases to the average reserve grade of the ore body and production
nears steady state levels. A more meaningful measurement during the production
build-up phase is cash cost per tonne although also impacted by the lower than
planned production volumes. Cash cost per tonne of $79 were achieved in Q4 2011
with the year to date in line with the expected costs of $71 per tonne during
the production build-up.

Depletion charge

3 months
      ended
    12 months
      endedDecember 31
      2011
    September 30
      2011
    December 31
      2010
    December 31
      2011
    December 31
      2010Nevada operations ($000)
    1,169
    1,174
    2,061
    5,063
    6,673South African operations ($000)
    (13)
    233
    -
    490
    -Total ($000)
    1,156
    1,407
    2,061
    5,553
    6,673


This is a non-cash item and relates to the amortization charge
on the Hollister and Burnstone mineral properties.

Depreciation charge

3 months
      ended
    12 months
      endedDecember 31
      2011
    September 30
      2011
    December 31
      2010
    December 31
      2011
    December 31
      2010Nevada operations ($000)
    1,053
    894
    609
    3,933
    3,427South African operations ($000)
    268
    4,136
    -
    8,746
    -Total ($000)
    1,321
    5,030
    609
    12,679
    3,427


This is a non-cash item and relates to the depreciation charge
for the Nevada and South African operations. The increase year on year is due to
the commencement of production at the Burnstone operation as well as the
increase in trial mining activities at the Nevada operations.

Exploration expenses

The exploration expenses predominantly relate to underground
exploration at our Hollister property which amounted to $8.1 million for 2011
(2010:$8.2 million). The remainder relates to our Tanzanian properties with
limited costs incurred on exploration activities at Burnstone.

Pre-development expenses

The pre-development expenditures relate to underground
development at our Hollister Project which increased to $17.7 million
(2010:$13.4 million) during 2011 following the development of the Upper zone
ramp. Underground development costs at our Hollister project will be expensed
until such time as the Environmental Impact Statement (EIS) has been completed
(expected Q3,2012). Refer to section 4.1for more details on the Hollister
Project permitting.

Foreign exchange gain

This movement predominantly relates to the fluctuation between
the Canadian ($) and United States (US$) dollar on the Senior Secured Notes
(SSN) (up to settlement in March 2011), the US$150 million term facility
agreement as well as the associated Zero Cost Collar (ZCC) hedge structure as
these are denominated in US$.

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 option price and volatility of the
Companys share price.

7

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

Interest expense

Interest expenses were capitalized during the construction
phase of the Burnstone project in terms of the Companys accounting policy. The
construction phase concluded in January 2011 and interest expenses are now being
expensed through the income statement. The interest expense recorded in earnings
for 2010 is net of $30.6 million interest capitalized to mine development. The
interest expense includes the accretion charge on the convertible debentures,
interest on the term loan facilities as well as the interest incurred on the SSN
up to settlement in March 2011.

Impairment of loan due from related party

An impairment provision for $13.6 million was recorded against
the loan advanced to our BEE partner under the 2010 guarantee agreement as a
result of the pro-longed decrease in the value of the shares our BEE partner
owns in the Company that serves as collateral for the advance. Refer to section
8 for further details.

Loss on derivative instruments

Included in loss on derivative instruments are the following
major elements:

| | a. | Loss on settlement of Senior Secured
  Notes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | This is a non-cash accounting charge of $8.8 million
      resulting from the accounting policy for the SSN. A monthly accretion
      charge to increase the recorded liability was processed to increase the
      liability to the settlement value over the maturity period of the notes.
      Due to the notes being settled on March 15, 2011 as opposed to December
      12, 2011 the remaining accretion charge was recorded on the day of
      settlement, resulting in an accounting loss on settlement. From a cash
      flow perspective the notes were settled in terms of the note agreement and
      no additional costs were incurred on settlement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | b. | Unrealized loss and mark-to-market adjustments on
      financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | A fair value loss of $7.3 million was recorded in March
      2011 on initial recognition of the ZCC hedge program for the US$70 million
      term loan entered into. A loss of $11.5 million was also recognized on the
      fair value movement of this ZCC hedge program for the year ended December
      31, 2011. A fair value loss of $18.3 million was recorded in December 2011
      as a result of the novation of the ZCC relating to the restructured US$150
      million term facility. A profit of $7.7 million was recognized on the fair
      value movement of this ZCC hedge program since novation. The fair value
      adjustment recorded in the financial statements is calculated with
      reference to the price of the put and call options and is 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 options (US$1,890 and US$1,930). Refer
      to section 8 for further detail on the ZCC hedge
  structures.

Income tax recovery

Our Nevada operations have now demonstrated their ability to
generate taxable earnings and we therefore recognized a net $49.7 million
deferred tax asset on their unused tax losses and resource pools.

Other comprehensive loss

A $100 million cumulative translation adjustment charge was
recorded for the year relating to the devaluation of the South African Rand
(ZAR) against the $ as well as the strengthening of the US$ against the $. The translation adjustment is recorded on
conversion of the respective subsidiaries trial balances from their functional
currency to the reporting currency of the Company.

8

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

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

Total assets

Total assets increased by $95 million and current assets by $27
million since December 31, 2010 predominantly due to the increase in cash and
cash equivalents, inventories as well as capitalized development costs at
Burnstone. The net movement in total assets includes a $26 million depreciation
and depletion charge as well as $101 million in foreign exchange movement on
property, plant and equipment.

Total liabilities

Total liabilities increased by $89 million since December 31,
2010 mainly due to the following reasons:

- Trade payables and accrued liabilitiesThe balance decreased by $17
  million following the completion of the Burnstone construction program in
  February 2011. The remaining $11 million of the short term gold advance loan
  entered into during October 2011 is also included under trade payables and
  accrued liabilities.
- Convertible debenturesThe balance increased by $7 million due to the
  accretion charge being recorded over the term of this facility.
- Term facility and SSNThe Company entered into a term facility agreement
  with Credit Suisse in March 2011 for US$70 million. US$52 million from the
  proceeds of this loan was used to settle the SSN on March 15, 2011. The
  Company restructured the 2010 US$72 million term facility into a US$150
  million term facility in December 2011 of which US$130 million was drawn up to
  December 31, 2011.
- Other liabilitiesThe net fair value liability on the hedge programs
  increased by $22 million year on year as a result of the restructured term
  facility and associated hedge structure and the increase in the gold price.

Shareholders equity

During the year ended December 31, 2011, the Companys issued
share capital increased by 61.7 million common shares due to the following
transactions:

- Bought deal public offeringThe Company closed a $75 million bought deal
  public offering in February 2011. The 15% overallotment option of the
  underwriters was executed as well taking the gross proceeds to $86 million.
  33.8 million shares were issued at a price of $2.55 per share which
  constituted a 5% discount to market price on the day.
- Share purchase warrants exercised24.7 million share purchase warrants
  were exercised for the 12 months ended December 31, 2011.

9

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

- Share purchase options exercised3.1 million share purchase options
  were exercised by employees and management.

At December 31, 2011, the Company had 476 million common shares
issued and outstanding and 18 million share options were outstanding.

As of the date of this MD&A the Company had 542 million
common shares issued and 33.4 million share purchase warrants outstanding
following the closing of the $50 million equity offering on March 30, 2012. A
further 23.3 million share options were also outstanding on the date of this
MD&A.

Liquidity

The Company generated net cash of $24.2 million from operating
activities during the year, compared to $2.7 million utilized in operations for
the comparative period. 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 decreased to $164
million during the year compared to $232 million in 2010 which included the
development of the Burnstone capital project. Approximately $20 million in
payments to construction contractors for work completed in 2010 is included
under investment activities for the 12 months ended December 31, 2011.

Net proceeds of $151 million were received from financing
activities during fiscal 2011 (2010:$159 million). The net proceeds relate
predominantly to the bought deal public offering in February 2011 and warrants
and share options exercised ($115 million) and the net inflow on debt ($36
million).

The Company monitors its spending plans, repayment obligations
and cash resources and acts 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.

Taking cognizance of the start-up risks associated with new
projects management initiated and closed a bought deal public offering in
February 2011 with net proceeds of $81 million received on February 23, 2011.
Proceeds from this offering were used to settle outstanding construction
creditors for Burnstone with the remainder predominantly used to fund working
capital during the Burnstone production build-up.

The Company offered a $0.07
  early exercise discount to holders of the $1.25 warrants expiring November 2011
  in order to further mitigate the risk of inadequate cash flow resources during
  the production build-up phase at Burnstone. 10 million of the warrants were
  exercised prior to June 30, 2011 with another 9.2 million warrants exercised in
  July 2011 and the remaining approximately 223,000 warrants expired unexercised
  on November 15, 2011.

To negate the negative impact on working capital from the
carbon shipment arrangement at our Nevada operation, a US$15 million gold sales
advance was agreed with our bullion off taker, RK Finance Trust 1, during
October 2011. This advance was settled by March 30, 2012.

The slower than planned production build-up at Burnstone had a
consequential impact on the cash resources of the Company which remains a
constant concern with investors. Taking cognizance of these concerns, the
Company successfully negotiated the restructuring of Term Loan I (refer to
annual financial statements), thereby increasing the facility to $152.6 million
(US$150 million) and extending repayment to 2016. $135 million (US$130 million)
of the restructured facility was drawn down up to December 31, 2011 with an
additional $10 million (US$10 million) drawn down in February 2012. $10 million
(US$10 million) is available for future draw down as of the date of this
MD&A.

10

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

On March 15, 2012 the Company announced that it has entered
into an agreement pursuant to which a syndicate of Underwriters have agreed to,
on a bought deal basis, to buy 66,700,000 units of the Company (the Units), at a price of $0.75 per unit, for aggregate
gross proceeds of approximately $50 million (the "Offering"), by way of a short
form prospectus. Each unit consist of one common share of Great Basin Gold (a
Common Share) and one half of a purchase warrant (each whole warrant, a
Warrant). Each warrant will be exercisable for a period of 2 years following
the closing of the Offering at an exercise price of $0.90 per warrant. The
Offering successfully closed on March 30, 2012 with the 15% over-allotment
option granted to the Underwriters to remain open for a period of 30 days
following the closing.Net proceeds from the Offering will be used towards
working capital for the development and ramp up of the Burnstone Mine which is
expected to turn cash flow positive by Q3,2012.

Delivering on planned production from both the Nevada and South
African operations remains essential to the Companys ability to fund its
operations and meet its debt repayment obligations in the near term.

At December
  31, 2011, the Company had net working capital1of $3.5 million that
  included $26 million in cash reserves, another $14 million in near cash reserves
  and also had $20 million available to be drawn upon under the restructured term
  facility.

The Company has no "Purchase Obligations", defined as any
agreement to purchase goods or services that is enforceable and legally binding
on the Company that specifies 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 south west Nevada 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 Bureau of Land Management (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 Hollister 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 , and 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.

___________________________1Working capital
includes cash and cash equivalents, trade and other receivables, inventories,
trade payables and accrued liabilities and is considered a non-GAAP measure.

11

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

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 Hollister with 80%
of the latter distance over paved roads.

Trial stoping and milling

3 months
      ended
    12 months
      endedDecember 31
      2011
    September 30
      2011
    December 31
      2010
    December 31
      2011
    December 31
      2010Ore tonnes to surface
    22,431
    26,474
    24,946
    96,030
    89,613Contained Au oz extracted
    18,281
    19,985
    25,328
    86,518
    100,867Contained Ag oz extracted
    139,626
    178,539
    101,431
    711,493
    559,195Contained Au eqv oz extracted
    21,773
    23,811
    26,849
    101,764
    109,255Contained average grade Au oz/tonne
      (gram/tonne)
    0.81 (26.2 g/t)
    0.75 (24.3 g/t)
    1.02 (32.6 g/t)
    0.90 (29.0 g/t)
    1.17 (37.6 g/t)Contained average grade Au eqv oz/tonne
      (gram/tonne)
    6.22 (200.1 g/t)
    6.74 (216.8 g/t)
    4.07 (130.7 g/t)
    7.41 (238.2 g/t)
    7.08 (227.6 g/t)Tonnes processed
    24,328
    29,869
    25,003
    98,068
    116,029Recovered Au oz
    18,552
    22.701
    20,520
    86,444
    88,149Recovered Ag oz
    101,487
    156,030
    92,003
    521,099
    448,353Recovered Au eqv oz
    20,727
    26,045
    21,901
    97,610
    95,186Recovery % Au
    92%
    92%
    80%
    92%
    82%Recovery % Ag
    70%
    74%
    61%
    72%
    60%Au eqv oz sold
    17,603
    22,790
    32,300
    92,239
    88,789


The presentation of production results for the Nevada
operations were changed from imperial to metric on January 1, 2011 to be
consistent and comparable with production results reported for the industry and
our South African operations. Comparative results have been adjusted to conform.
The tonnes milled, Au and Ag ounces recovered as well as recovered Au eqv oz in
the table above for the 3 and 12 months ended December 31, 2010 include the
third party toll milling campaigns.

The Nevada operations produced 20,727 Au eqv ounces2from trial mining activities during the quarter (Q3,2011: 26,045 Au eqv
ounces) and 97,610 Au eqv oz for the full year of production (2010: 95,186 Au
eqv oz), compared to an average annual forecast of 100,000 Au eqv oz for the
year. As previously indicated, the high grade nature of the Hollister ore body
can lead to quarterly grade fluctuations, and this occurred in this quarter. The
Au eqv grade increased by 8% from 0.75 oz/t (24.3 g/t) in Q3,2011 to 0.81 oz/t
(26.2 g/t) in Q4,2011.

___________________________2Gold equivalent
(Au eqv) calculations use US$1,400/oz for Au and US$30/oz for Ag.

12

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

Fiscal 2011 was the first year that all material extracted from
trial mining activities was processed at our Esmeralda mill, which showed a
marked improvement in Au recovery from 2010, increasing from 82% to 92%.Our
Esmeralda mill increased recovered Au eqv oz by 47% in 2011 to 97,610 from the
69,001 Au eqv oz (73% of the total 2010 Au eqv recovered ounces) recovered in
2010. As the performance of the acid wash and carbon regeneration circuit, which
was commissioned during November 2011, has not yet reached planned levels, the
mill continued with the process of replacing carbon on a continuous basis and
this impacted the amount of Au eqv oz sold as well as the cash costs reported
for the quarter and year. In an effort to mitigate the time delay in recognizing
produced metal in revenue and the insufficient capacity of local refiners, a
shipment of loaded carbon was sent to Rand Refinery in South Africa in late
December 2011 at an additional cost of approximately US$35 per Au eqv oz.
Regular shipments of carbon to Rand Refinery will continue until April 2012 when
the improvements to the acid wash and carbon regeneration circuit is expected to
be completed. It is further expected that the Ag recoveries to be achieved once
the upgrade is completed will be in the range of 75  80%.

As of February 2012, additional emphasis on ore development is
improving flexibility with the availability of additional stopes allowing for
improved grade blending of extracted ore and more consistent performance on a
monthly basis. The completion of the Upper Level ramp now allows for access for
delineation drilling with information obtained improving development planning
and scheduling.

Progress on the Environmental Impact Statement

The Company has completed its review of the Draft Environmental
Impact Statement (DEIS). BLM review of the DEIS, is expected to be completed
in March 2012. BLM has commented on the Notice of Availability (NOA), but
comments from certain authorities are still outstanding. Once the third party
contractor has received all the comments, a camera-ready version of the DEIS
will be produced. Hereafter BLM Elko will do a quality review of the DEIS and
forward it to the BLM Washington office for publication along with the NOA.

The DEIS is expected to be published in April 2012 at which
time the public participation process will commence. A favorable Record of
Decision is expected in Q3,2012 that will mark the completion of the EIS and
allow the Hollister project to enter into commercial production.

Underground exploration

Underground exploration and stope delineation drilling has
continued during 2011 and Q1,2012. Statistics are shown below. In total 246
boreholes for 103,184 feet (31,268 meters) were completed to end February, 2012.
These comprised 79 exploration and cover boreholes testing Clementine and SE
Gwenivere targets (totalling 42,480 feet or 12,903 meters), 59 Upper Level
(formally Blanket Zone) exploration/evaluation holes (totalling 24,078 feet or
7,296 meters), and 108 stope delineation holes (totalling 36,527 feet or 11,069
meters). After reduction to one rig after the second quarter of 2011, the
operation has gradually built up to four underground rigs operating  one for
epithermal vein/stope delineation, two small man portables for vein extension
testing and Upper Level evaluation fan drilling, and a larger LM-90 rig
commissioned specifically for the current drilling program under the Hollister
open-pit excavations.

13

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

Hollister Underground Drilling Statistics  January 2011 to
February 2012

Boreholes
    IntersectionsNo
    Feet
    Meters
    NoUg Exploration & Cover
    79
    42,580
    12,903
    215Ug Upper Level evaluation
    59
    24,078
    7,296
    144Ug Stope delineation
    108
    36,526
    11,069
    177Total
    246
    103,184
    31,268
    536


Hollister Underground Drilling Results  January 2011 to
February 2012

Av Width
    Av Au
    Av Au
    Av Ag
    Av Ag
    Max Au
    Max Widthft
    opt
    g/t
    opt
    g/t
    opt
    ftUg Exploration & Cover
    1.5
    1.310
    44.84
    4.6
    156.2
    98.850
    9.1Ug Upper Level evaluation
    3.1
    0.385
    13.17
    1.1
    35.3
    7.119
    17.5Ug Stope delineation
    1.1
    0.770
    26.37
    5.2
    176.5
    11.580
    5.0


Upper level exploration

A ramp and an Alimak raise accessing the Upper Level zones
(previously Blanket Zone) of mineralization around the Tertiary  Ordovician
unconformity has been completed to 5278 Level, from where I drifting has
progressed towards high grade (+1 opt Au) grade shells formed above the
Clementine (16-20) and Gwenivere (8-10) vein systems. This infrastructure has
been vital in enabling the initiation of short fan drilling by recently
commissioned Bazooka and SJ 252 drilling rigs. This phase of drilling is
providing the basis for targeting trial stoping areas, and is expected to
commensurate in an increase in Upper Level Indicated mineral resources.

Surface exploration

A phase of detailed surface mapping was completed during the
summer 2011 field season, and has now been integrated with the sub-regional and
minesite scale collation and interpretation of airborne magnetic, ground CSAMT
(high resolution resistivity) and gravity data. The detailed surface work is
providing significant support to the CSAMT interpretations (correlation of high
resistivity spikes with volcanic vents/geyserites and hydrothermal breccias
zones), as well as providing clear evidence for the western extension of the
Gwenivere/Clementine system, supported by volcanic features at surface.
Currently 15 significant vent areas, which are largely the visible sinter
caps, have been identified, attesting to long-lived geothermal water
circulation. A multitude of smaller associated vents and steam fumeroles etc
have also been identified.

Drill programs planned for the 2012 field season (refer below)
have been refined to test numerous features detailed by the geological analysis.
The Hatter Graben is planned to be drilled to a resource classification subject
to adequate funds being available and the Butte East and South Velvet targets
are supported by the mapping and CSAMT interpretations. CSAMT high resolution
resistivity data has been integrated with the surface mapping, plus empirical
borehole data, and a number of new vein system targets are emerging from this
work.

14

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 



Figure 1 : The Companys planned surface exploration targets
for Hollister

Plans for 2012

The Company plans to continue its trial mining (ore removal and
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. The Company, together with the BLM, will also
continue working on finalization of the EIS for Hollister by Q3,2012.

The Nevada operation is targeted to produce an estimated 90,000
to 100,000 Au eqv oz in 2012 at a cash cost estimated to range between US$700 to
US$750. Assuming successful completion of the EIS, the Company is expected to be
in a position to move into commercial production expediently taking into account
that trial mining will have reduced some of the risks that are normally
associated with start-up operations. The Nevada operation is expected to incur
capital costs of approximately US$31 million in 2012, which includes underground
development for US$22.4 million, the construction of the power line (following
completion of the EIS) for US$2.5 million, the upgrade of the Esmeralda tailings
facility for US$3.4 million as well as completion of the West Alimak raise for
US$2.7 million to be paid for out of proceeds from trial mining operations at
the Hollister Gold Project.

A 2012 Mineral resource update for Hollister is pending
resolution of QAQC for the silver analyses over the period up to July 2011.
Pulps have been check assayed and certain changes have been made with respect to
the preparation and acid digestion procedures for the assays. It is anticipated
that a new resource estimate will be available during the second quarter of
2012. In the meantime a rigorous Indicator Kriging model has been applied for
testing and forecasting trial mining tonnage and grades.

A surface exploration
  program on the previously identified Hatter Graben area and the South Velvet and
  Butte East target areas, immediately north of the current underground
  infrastructure, are planned subject to the availability of funding.

15

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

|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
to commence full-scale underground mining. Blocks B and C are the areas of the
ore body to be mined in the next 36 months, while underground access to the
remaining areas of the ore body under the mine plan is being developed.

Production results

3 months ended
      December 31 2011
    3 months ended
      September 30 2011
    12 months ended
      December 31 2011Ore development (meters)
    2,900
    2,786
    8,402Waste development (meters)
    1,083
    1,403
    6,441Total development (meters)
    3,983
    4,189
    14,843Stoping (square meters)
    6,653
    7,408
    22,943Ore tonnes to surface  development
    126,282
    138,158
    499,309Ore tonnes to surface  stoping
    21,007
    24,379
    80,472Ore tonnes to surface  total
    147,289
    162,537
    579,781Contained Au oz extracted - development
    4,468
    3,451
    13,845Contained Au oz extracted - stoping
    2,423
    2,705
    7,609Contained Au oz extracted - total
    6,891
    6,156
    21,454Contained average grade Au eqv oz/tonne
      (g/t) development
    0.04 (1.14 g/t))
    0.02 (0.80 g/t)
    0.03 (0.89 g/t)Contained average grade Au eqv oz/tonne
      (g/t)  stoping
    0.12 (3.71 g/t)
    0.11 (3.57 g/t)
    0.09 (3.04 g/t)Contained average grade Au eqv oz/tonne
      (g/t)  total
    0.05 (1.50 g/t)
    0.04 (1.22 g/t)
    0.04 (1.19 g/t)Tonnes milled
    160,762
    209,224
    775,524Recovered Au oz
    6,470
    6,486
    23,361Recovery % Au
    89%
    89%
    88%Au oz sold
    7,058
    6,518
    21,989


During early 2011 a Graben fault displacing the B2 mining block
was encountered. An umbrella drilling programme consisting of 100 meter spacing
between informing points was launched to determine the exact location of the B2
Block and to mitigate any risk of finding another similar structure in the
medium term mine plan. Over 19 kilometers of umbrella type infill drilling was
completed by December 2011 in the 24 month mining area which confirmed the
location of the B2 Block and indicated no other major faults in the area. This
drilling will continue to ensure that any potential displacement is identified
in a timely manner to allow for incorporation into the mine plan. The localised
displacement of the B2 mining block was not identified from previous, vertically
orientated, surface drilling. The additional infill drilling not only provided
comfort on the geological structures to be expected in the near term mine plan
but also indicated that there was no material loss in mineral resources as a
result of the Graben faulting.

66% additional waste development had to be undertaken during
the six months ended June 30, 2011 due to the Graben fault encountered in the
planned mining area. The additional waste development during the first six
months of 2011 had a negative impact on ore development, with only 35% of the
planned ore development achievable. 67% of the planned ore development for H2
2011 was completed with the available ore development ends now averaging over
38, up from 2 in June 2011. The ore to waste development ratio improved during 2011 with ore development
increasing to 73% of total development by December 31, 2011. The targeted ratio
being 85% ore and 15% waste development at steady state production.

16

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

Due to the temporary water handling system being unable to
handle the volumes of water generated from the increasing mining activities,
underground flooding occurred in the latter part of 2011 and early 2012 which
impacted on the advancement of development. Additional pumps and back-up pump
columns are providing additional capacity to not only recirculate the water, but
also to transport service water to all working ends, which will improve rates of
development and stoping. The Company expects the mine to meet its first
development milestone of 1,500 ore development meters per month in the second
quarter of 2012. To achieve these rates, the mine will need a minimum of 38 ore
development ends and each development end must advance on average by
approximately 40 meters a month. By the end of March 2012, ore development rates
in excess of 38 meters per end per month were being achieved and 38 ore
development ends were available following the dewatering of all of the ends by
March 30.

The continuing development of stoping blocks will open up
additional development ends and allow ore development to increase to an average
of 2,500 meters per month from approximately 63 ore development ends by the
fourth quarter of 2012. This additional development will provide mining
flexibility with an estimated eight months of mineable reserves being available
by the end of 2012 which will further enhance the production build up during
2013 and 2014 to steady state production. The Company is also focusing on
infrastructure improvements to improve capacity and productivity of ore handling
underground which includes an automated ore loading system (completed), ore
conveyer systems from the C mining block, a decline ramp down to the shaft
bottom to allow for effective spillage clean-up and the completion of the first
of three permanent clear water dams, inclusive of water settling dams by July
2012.

Further optimization of the Long Hole Stoping mining method
continued during 2011 with a revised stope lay-out design, the Up-Dip Strike
Pillar being implemented. This design increases the square meters available for
stoping for each meter of ore developed by 88% from nine to over 17 square
meters compared with the initial L-Pillar design. The ore development meters to
open up the required 30,000 stope square meters per month will reduce from 2,307
meters to 1,764 meters at full production as a result of the revised stope
lay-out. This reduction in ore development meters will allow the Company to
expedite building up its ore reserves available for mining with flexibility in
mining areas improving substantially. The concentration of mining in the various
mining Blocks will also have a positive effect on the Companys trackless mining
equipment, labour and ventilation requirements. There will be a steady build-up
over the next 18 months towards the target of having a one year ore reserves
developed.

The revised up-dip strike pillar layout also allows for
improved cleaning and can be adjusted in size depending on the available ground.
Strike drives can be developed at any spacing, (e.g. at 50 meters if a stope
block is required sooner or if a fault is intersected). The stope block will
then only be 30x50 meters. Cleaning with water jets has been also improved with
the cleaning gulley that now cuts through the support pillar and allowing the
operator to remove ore at a down dip angle. The 20 meter holes that will be
drilled at an up-dip angle will resolve challenges with de-sledging the holes
drilled at a down-dip angle and thus becoming self-cleaning.

The shortfall in ore development not only impacted on the mined
ounces, but also on the availability of stopes. A key ratio is the extracted Au
ounces from ore development and stoping (development/stoping ratio). This ratio
impacts on the head grade of tonnes delivered to the mill which in turn impacts
on the recovered and sold ounces. 36% of contained Au ounces delivered to the
mill were derived from stoping during 2011 compared to a targeted
development/stoping ratio at steady state production of 65% of contained ounces
from stoping. Ore development remains the key to delivering the planned
production build-up and will therefore be the priority focus for 2012.

17

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

In order to alleviate congestion and to prepare for the planned
increase in blasted ore tonnes as the development rates increase, removing
blasted material from underground received preference in February 2012. Drilling
of stopes , however, continued during this period which will allow for an
increased rate of production build up in March 2012. Over 12,000 m2(up from 7,200 m2in December 2011) of prepared stopes were
available at the end of February 2012 for mining. In addition just over 6,000
m2are partially developed. Achieving a minimum of 1,500 meters of
ore development per month by July 2012 will allow for an average of 22,000
m2of stoping and a production rate in excess of 10,000 ounces per
month.

The Burnstone metallurgical plant is performing in line with
expectations with 775,524 tonnes processed during 2011, an average of 65,000
tonnes per month. Mill feed is controlled to account for the lower than planned
ore from development and stopes with the mill capacity being in excess of
145,000 tonnes per month. The low ore head grade delivered to the mill impact on
the recoveries which is expected to improve to the targeted industry average of
95% as the grade increases in line with the average mineral reserve grade for
the Burnstone Mine.

Commissioning of capital projects

The initial mine capital expenditure program has been completed
and the mine commenced with production build-up in February 2011. Major capital
projects that include the vertical shaft, metallurgical plant, decline,
ventilation shaft and required surface and underground infrastructure were
commissioned by January 2011. The components of the mine required to enter
commercial production have thus been completed and commissioned and therefore
concludes the development phase of the project. Further development costs are
being capitalized as per the Companys accounting policy.

Capital costs of US$130 million were incurred during 2011,
which were higher than the estimate of US$105 million for a number of reasons.
The additional development required to access the planned mining areas
(resulting from the graben fault) contributed to the increase in expected
capital as well as the final costs incurred on commissioning and close out of
the major capital projects. The additional development required also
necessitated an increase of the mining equipment to ensure the right suite of
equipment is available.

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 de-watering infrastructure and labour
costs were higher due to a decision to recruit and train labour from the local
community. The slower rate of mine development had a negative impact on the
previously projected development costs.

US$530 million of the initial project capital expenditure was
completed by December 31, 2011. The Companys estimates of capital to be spent
in 2012 and 2013 are presented below.

2012 Estimates
      (US$ million)
    2013 Estimates
      (US$ million)Mine development
    56
    34Vertical shaft
    7
    -Mining equipment
    12
    7Total estimated capital
    75
    41


18

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

Resource update

The Company announced an updated mineral resource estimate for
Burnstone during the year. The updated mineral resource estimate, inclusive of
all drilling and underground evaluation up to June 30, 2011, is tabulated below
at a range of cutoffs. At a cutoff of 300 cmg/t, the total Measured and
Indicated Resources contain approximately12.6 million ounces of gold, and
the Inferred Resources contain approximately 10.1 million ounces of gold.

Class
    Cut Off
      cmg/t
    Tonnes Mt
    Gold g/t
    Gold ozMeasured
    300
    38.8
    5.34
    6,664,900Measured
    350
    34.8
    5.52
    6,166,600Indicated
    300
    28.1
    6.59
    5,947,780Indicated
    350
    25.8
    6.83
    5,654,100Total measured and indicated
    300
    66.9
    5.87
    12,612,600Total measured and indicated
    350
    60.5
    6.07
    11,820,700Inferred
    300
    72.8
    4.30
    10,061,900Inferred
    350
    61.0
    4.60
    9,023,000


|1. | Mineral resources that are not mineral reserves do not
      have demonstrated economic viability.
|-- | --------------------------------------------------------------------------------------------------
|2. | Metallurgical recoveries are not applied to resource
      values.                                

At a 300cmg/t cut-off, the current update reflects a slight
increase in tonnage (3%) and a slight drop in grade (-6%) when compared to the
August 2010 estimate, include the mines mineral reserves and have been depleted
with production to June 30, 2011 and are stated as of that date.

The mineral resource classification method applied in this
update is in line with that utilized in the August 2010 estimate, with a minimum
of six informing samples used for estimates in the Measured category, a minimum
of three informing samples used for Indicated, and two informing samples used
for Inferred. The total number of informing Kimberley Reef intersections
utilized for the estimate is 2,050, a substantial increase from the 610
intersections used in the 2010 estimate. For the 2011 estimate, these include
514 from surface boreholes (339 in 2010), 42 from underground boreholes (35 in
2010), and 1,494 from underground channel composite samples (362 in 2010). In
addition, a total of 819 historic deflections from surface boreholes have been
used, where appropriate, for assay and sedimentological confirmation. Geozones
developed from deposit modeling in the area of interest were updated as part of
the basis for the estimation, but remain very similar to those used in the
August 2010 resource update. These zones are delineated by a combination of
variable geological parameters such as channel width, gold grade (g/t) and gold
accumulation (cmg/t), footwall lithology, and sedimentary facies.

Variography,
  generated from the current geostatistical analyses for the estimates, is in line
  with previous observations. The continued underground exposure of Kimberley Reef
  from mine development is providing a basis for detailed evaluation data (channel
  samples) and structural mapping. All told, the results continue to demonstrate
  higher confidence in the estimated total Measured and Indicated resources.

Underground and surface exploration

Infill drilling (44 boreholes totaling 16,819 meters) was
completed from surface during 2011 and to February 2012. This drilling continues
to provide positive results in tightening up on the evaluation and structural
geometry of certain mining blocks. Development and stope panel evaluation is
undertaken by channel sampling of exposed sidewalls. Horizontal or shallow
dipping cover drilling is undertaken for development control.

Over the review period channel samples continued to be taken,
with over 18,700 samples taken to date. The summary gold grade (g/t), channel
width (cw) and gold content (cmg/t) statistics for the various mining blocks are
shown below.

19

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

BLOCK
    Channel
      Grade Au g/t
    Planned
      Grade Au g/t
    Channel Reef
      width CW cm
    Planned Reef
      width CW cm
    Channel
      Content Cmg/t
    Planned
      Content Cmg/tB2 B3 C3 C Upper
    8.05 3.23 15.04 14.27
    11.87 3.19 12.56 13.30
    57 101 38 48
    54 102 30 43
    464 309 571 691
    641 325 377 572Averages
    6.96
    6.90
    76
    56
    525
    335


These results are in-line with or better than mine development
expectations. The 2011 Life-of-Mine plan indicated an average channel width of
68 cm.

Surface Exploration outside the Burnstone Mining
Right

Surface exploration continued on mineral rights located outside
the Burnstone mining right, with the continuation of the shallow basin edge
target evaluation program. The sub-cropping Kimberley Reef target at Roodepoort
 Kildare has been advanced to a point where drill evaluation is the next phase.
Subcropping Kimberley Reef on the farm Rietbult, northwest of the Burnstone
shaft, was drilled during 2011, with mixed results due to extensive block
faulting proximal to the basin bounding Suikerbos Fault.

Plans for 2012

Following a review of the current production levels and
progress of underground development and infrastructure, the Company expects the
Burnstone Mine to produce between 90,000 to 100,000 Au ounces at a cash cost of
US$900 to US$1,000 per oz for the 2012 fiscal year. These cash costs targets
represent an improvement on the actual costs achieved in 2011 (US$1,801 per oz),
however the high ratio of development to stoping ore will impact on the head
grade delivered to the mill and cash costs for the balance of 2012. All
equipment required for the production build up is in place. All of our mining
teams are currently in place and are undergoing intensive team training to
enable them to plan, assess and adjust to the constantly increasing rate of
production.

The expected production range also contemplates for the
previously disclosed upgrade and completion of underground and shaft
infrastructure. Achieving the planned production build-up would allow the
Burnstone Mine to generate positive cash flow after capital investment (assuming
a gold price of US$1,650 and a US$/ZAR exchange rate of 7.5) during the third
quarter of 2012.

|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 billion year old Ga) Lupa Goldfields (south-west). The
Company also manages a joint venture with African Barrick in the Geita Belt of
the Lake Victoria Goldfields.

20

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 



Figure 2 : The Companys project areas in Tanzania

The Company entered into an agreement in June 2011 whereby it
granted Shanta Gold Limited (Shanta) the option, following the fulfillment of
the conditions precedent, to acquire an 80% interest in the Companys
wholly-owned subsidiary, Shield Resources Limited (Shield), who is the holder
of various prospecting licenses in the Lupa region of Tanzania.

In consideration for providing Shanta with the exclusive right
to acquire the shareholding in Shield, Shanta is obliged to issue ordinary
shares to the value of US$7 million and Shanta warrants to the value of US$7
million (at an implied value of 35p each) to the Company. Furthermore Shanta has
to fund a US$12 million exploration program, spread over a period of 3 years
commencing January 1, 2012. Shanta will acquire the 80% equity interest in
Shield upon the completion of the exploration program. There is also a claw-back
option in the agreement, whereby Great Basin can earn back into the assets if
Shanta discover in excess of 500koz Indicated and Inferred resources.

21

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 



Figure 3 : Shield Resources / Shanta JV properties in the
Lupa Goldfield.

Shanta has a proven track record in the Lupa region with
prospects of near term production from their advanced development projects and
we believe they are ideally suited to explore our properties in the region and
add economical resources to the current resource base. The JV also provides
Great Basin Gold with the flexibility to direct all our activities in Tanazania
to our Geita project areas.

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

The Company disposed of it mineral rights on the island of
Kurils (eastern Russia) during 2011. Although an initial phase of diamond
drilling was completed in 2008, the project still requires a significant amount
of phased exploration programs in order to generate a significant mineral
resource base. The required exploration program did not form part of the
Companys medium term strategy.

|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).

22

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

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$1,405 on January 4, 2011 and traded downwards
to reach the low for 2011 of US$1,319 on January 28. A slow upward price trend
followed for the remainder of H1 2011 which accelerated in H2 2011 with the
highest closing price for 2011 of US$1,895 achieved on September 5. We saw
significant volatility since then with gold trading between US$1,795 and
US$1,531 where it also closed at on December 31, 2011. Gold traded at a
cumulative average price of US$1,572 during the year. The volatility and
increase in gold prices in 2011 was initially driven by the political unrest in
the Middle-East and NorthAfrica with the Euro debt concerns adding to the
momentum in the latter part of 2011 with gold again seen as the safe-haven
investment. The volatility continues in the early part of 2012 with the Euro
debt crisis remaining on the fore front and mixed signals as to the recovery in
the Global economy. During 2012 gold traded at a cumulative average of US$1,692
up to March 30, 2012.

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 469,614 Ag oz sold from trial mining activities at Hollister. Silver
opened on January 4, 2011 at US$30.63 and traded at a cumulative average of
US$35.12 during the year before closing on US$28.18. Silver prices recovered in
early 2012 and traded at a cumulative average of US$32,64 up to March 30, 2012.

The volatility in the gold price and unstable Global economic
conditions impacted the share price performance of most junior developing
precious metal resource Companies. The delay in the production build-up at our
Burnstone project and the liquidity concerns created by this however impacted
severely on our share price as the risk adverse strategy followed by most
investors resulted in over selling of the Companys shares. After opening at
$2.95 on January 4, 2011 the share price traded downwards throughout the year
and closed at $0.93 on December 31, 2011.

The exchange rate between the US$, $ and ZAR impacts on the
Companys earnings and cash flow. The ZAR opened at R6.62 against the US$ on
January 4, 2011 and weakened to R8.52 in November 2011. After trading at an
average exchange rate of US$1 = R7.23 during the year it closed at US$1 = R7.81
on December 31, 2011. The US$ and $ traded at an average of US$1 = $0.989 during
the year.

23

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

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

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

As at and for
      the years endedDecember 31
      2011 $000
    December 31
      2010 $000
    January 1
      2010 $000Current assets Other assets
    61,907 788,403
    35,038 720,345
    126,862 366,310Total assets
    850,310
    755,383
    493,172Current liabilities Non-current
      liabilities Shareholders equity
    79,459 299,283 471,568
    115,525 174,141
      465,717
    72,974 90,938 329,260Total liabilities and shareholders
      equity
    850,310
    755,383
    493,172Working capital
      (deficit)1
    3,465
    (27,976)
    91,623Revenue Expenses
      Loss for the year
    170,324 (188,061)
      (17,737)
    99,706 (126,847)
      (27,141)
    33,738 (144,898)
      (111,160)Basic loss per share
    $ (0.04)
    $ (0.08)
    $ (0.36)Adjusted loss per share
    $ (0.06)
    $ (0.13)
    $ (0.28)Weighted average number of common shares
      outstanding (thousands)
    459,099
    358,711
    310,068


1 Working capital (deficit) includes cash and cash receivables,
accounts receivable, inventory and accounts payable and is considered a non-GAAP
measure.

Dec
      31 2011
    Sept
      30 2011
    Jun
      30 2011
    Mar
      31 2011
    Dec
      31 2010
    Sept
      30 2010
    Jun
      30 2010
    Mar
      31 2010Current assets Other assets
    61,907 788,403
    46,263 729,034
    76,575 750,077
    105,633 718,825
    35,038 720,345
    60,102 618,993
    84,904 516,191
    92,613 408,856Total assets
    850,310
    775,297
    826,652
    824,458
    755,383
    679,095
    601,095
    501,469Current liabilities
      Non-current liabilities Shareholders equity
    79,459
      299,283 471,568
    100,263 229,220 445,814
    87,952 216,748 521,952
    89,265 226,479 508,714
    115,525
      174,141 465,717
    87,352 217,146 374,597
    89,467 168,007 343,621
    60,295
      120,014 321,160Total liabilities
      and shareholders equity
    850,310
    775,297
    826,652
    824,458
    755,383
    679,095
    601,095
    501,469Working capital
      (deficit)1
    3,465
    (5,438)
    30,314
    49,419
    (27,976)
    (19,821)
    15,400
    48,987Revenue Expenses
      Profit (loss) for the period
    40,570
      (2,928) 37,642
    46,673 (80,660) (33,987)
    56,738 (57,789) (1,051)
    26,343 (46,684) (20,341)
    42,714
      (35,528) 7,186
    12,230 (35,567) (23,337)
    37,940 (42,843) (4,903)
    6,822
      (12,909) (6,087)Basic earnings (loss)
      per share
    $ 0.08
    $ (0.07)
    $ 0.00
    $ (0.05)
    $ 0.02
    $ (0.07)
    $ (0.01)
    $ (0.02)Adjusted earnings
      (loss) per share
    $ (0.01)
    $ (0.03)
    $ 0.00
    $ (0.01)
    $ 0.02
    $ (0.05)
    $ (0.01)
    $ (0.02)Weighted average number of common
      shares outstanding (thousands)
    475,709
    473,856
    454,559
    431,624
    405,857
    351,739
    340,609
    336,893


1 Working capital (deficit) includes cash and cash receivables,
accounts receivable, inventory and accounts payable and is considered a non-GAAP
measure.

24

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

The Companys adjusted 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 generally decreasing losses are attributable to the increased gold
sale proceeds from trial mining at Hollister as well as commencement of
production at Burnstone, 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 operations, 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 except
during Q2 and Q3,2011 while the Upper zone ramp was being constructed. Timing of
recognizing metal sales from our Nevada operations were impacted by the
performance of the carbon regeneration circuit at our Esmeralda mill during 2011
which impacts on the Group earnings. All development costs relating to Burnstone
have been capitalized in 2009 and 2010 with operating costs as well as the net
interest expense recognized in earnings since February 2012. The Company expects
earnings to increase during 2012 as production from our Burnstone mine increases
and more consistent quarterly results are reported by our Nevada operations.

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

(a) Financial guarantee

In 2007 Great Basin completed a series of transactions in order
to achieve compliance with South Africas post-apartheid legislation designed to
facilitate participation by historical disadvantaged South Africans (HDSAs) in
the mining industry. This legislation is reflected in the South African Mining
Charter and required Great Basin to achieve a target of 26% ownership by HDSA in
the Companys South African projects by 2014. In order to comply with these
requirements, Tranter Burnstone (Pty) Ltd (Tranter), an HDSA company, acquired
19,938,650 Great Basin treasury common shares for $38 million (ZAR260 million)
which, because it involved indirect economic participation in both the Hollister
and Burnstone projects, was deemed equivalent to a 26% interest in Burnstone.
Tranter borrowed ZAR200 million ($27 million) from Investec Bank Ltd
(Investec), a South African bank, to partly fund the purchase of the shares
and Great Basin gave a loan guarantee in favour of Tranter limited of ZAR140
($19 million) million. A loan of $14 million (ZAR 108 million) was advanced to
Tranter up to October 2011 under the guarantee agreement to enable Tranter to
meet its interest payment obligation to Investec.

Tranter has been notified by Investec that it is currently in
breach of the requirements of its loan agreement due to an unfunded cash margin
call as a consequence of the decline in the value of the Great Basin common
shares serving as collateral for the loan. The Company has advanced
approximately $2.7 million (ZAR20 million) since November 2011 under the
Guarantee agreement to assist Tranter to meet the margin call requirements and
approximately $1.6 million (ZAR12 million) remains available to meet the
unfunded cash margin of approximately $6 million (ZAR45 million). The Company is
seeking, through ongoing discussions with Investec and Tranter, to assist
Tranter to remedy their breach position and meet their future loan obligations.
Whilst the outcome of the discussions is uncertain, the Company does not expect
the outcome of these discussions to affect its current compliance with the
Mining Charter or near term cash flow.

(b) Gold Fields royalty arbitration

The Company has received notification from Gold Fields Limited
("Gold Fields") that it intends to seek rescission of a 2007 agreement under
which Gold Fields cancelled a 2% net smelter royalty over a majority of Area 1
of the Burnstone Mine. Under that transaction, which was part of the Tranter
transaction described above, Gold Fields cancelled the royalty for consideration
of $11 million (ZAR 80 million), that was paid by Great Basin in 2007, and on
the condition that Gold Fields should receive certain Mining Charter score card
credits from the South African government, Gold Fields donated the proceeds to
Tranter which Tranter used to part fund the acquisition of the Great Basin
shares. As Gold Fields has not received these credits, the Company and Gold
Fields have been discussing a mutually acceptable settlement that will not impact on the
transformation agenda of the South African Government. On March 12, 2012, Gold
Fields gave notice of arbitration to the Company in respect of this matter.
Management does not expect this issue to have an impact on the Company's near
term cash-flow, development or production targets.

25

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

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

Contractually obligated cash flow requirements, including
interest, as at December 31, 2011, are as follows:

|                                  | Total
      ($million) | Less than one
      year ($million) | 1 to 3 years
      ($million) | 3 to 5 years
      ($million) | More than 5
      years ($million)
|--------------------------------- | ----------------------- | ------------------------------------ | ------------------------------ | ------------------------------ | -----------------------------------
|Finance lease liability(i)(ii)    | 3.1                     | 3.0                                  | 0.1                            | Nil                            | Nil                                
|Operating lease obligations       | 0.2                     | 0.2                                  | Nil                            | Nil                            | Nil                                
|Asset retirement obligations(iii) | 7.2                     | Nil                                  | Nil                            | Nil                            | 7.2                                
|Convertible debentures(iv)        | 156.4                   | 10.1                                 | 146.3                          | Nil                            | Nil                                
|Term loan I(i)(v)                 | 151.8                   | 6.3                                  | 73.2                           | 72.3                           | Nil                                
|Term loan II(i)(vi)               | 61.3                    | 19.1                                 | 30.7                           | 11.5                           | Nil                                
|Other(vii)                        | 0.9                     | 0.1                                  | 0.2                            | 0.2                            | 0.4                                
|Total                             | 380.9                   | 38.8                                 | 250.5                          | 84                             | 7.6                                

|(i)   | Amounts include scheduled interest payments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(ii)  | The principal debt amounts will be repaid in monthly
      installments over a period of 12 to 13 months and bear interest at 22.4%
      on outstanding capital. The finance leases are collateralized by the
      leased assets which had a carrying value of $4.5 million at December 31,
      2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(iii) | The asset retirement obligations are not adjusted for
      inflation and are not discounted.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(iv)  | The convertible 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(v)   | In December 2011, the Company successfully negotiated the
      restructuring of Term loan I, thereby increasing the facility to $152.6
      million (US$150 million) and extending repayment to 2016. $132 million
      (US$130 million) of the restructured facility was drawn down on December
      15, 2011 with an additional $20.3 million (US$20 million) available for
      future draw down on December 31, 2011. The restructured facility now has a
      maximum term of 5 years from the December 15, 2011 drawdown and capital
      will be repaid in 16 quarterly consecutive installments, commencing on
      March 15, 2013. Term loan I bears interest at a premium of 4% over the 3
      month US LIBOR rate and is secured by the Companys Burnstone property,
      its assets and certain subsidiary guarantees.
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(vi)  | The Company closed the $69 million (US$70 million) term
      loan in March 2011 (Term loan II). Term loan II is being repaid in 16
      remaining quarterly consecutive installments, bears interest at a premium
      of 3.75% over the 3 month US LIBOR rate and is secured by the Companys
      Nevada assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(vii) | Other obligations include nominal environmental
      obligations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|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. Refer to section 8(a) for a description of the Tranter transaction.
There were no other material related party transactions during the year.

26

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

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 financial statements requires management to
use judgment in applying its accounting policies and estimates and assumptions
about the future. Estimates and other judgments are continuously evaluated and
are based on managements experience and other factors, including expectations
about future events that are believed to be reasonable under the circumstances.
These estimates may have a significant impact on the financial statements.

|(a) | Mineral resources and reserves estimates and the
      impact on the carrying value of property, plant and equipment and
      depreciation and depletion charges                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | 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 and depreciation and
      depletion charges.                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | 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 recorded for property, plant and equipment.                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Depreciation and depletion of mineral properties and mine
      infrastructure is calculated and charged to earnings on the
      unit-of-production method. Proven and probable mineral reserves as well as
      an allocation of mineral resources not yet included in the mineral
      reserves are used in the unit-of- production method. The allocation of
      mineral resources included in the calculation of depreciation and
      depletion is based on managements estimates of resources to be converted
      into economical mineable reserves over the life of the project based on
      historical project and industry data on similar ore bodies. Changes to the
      mineral reserves and resources will impact on the depreciation and
      depletion charges recorded in earnings.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(b) | Inventories and the allocation of ore development,
      indirect mining and overhead expenses to production and underground
      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 ore development and 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. Additional information obtained in the future might impact on
      the allocation of these expenses.                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(c) | Site reclamation 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.                                                                                                                                                                                                                                                                                                                                        

27

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

|(d) | Share based payments expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | From time to time, the Company grants share purchase
      options to directors, employees, and service providers. The Company uses
      an 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(e) | Valuation of equity components                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The Company from time to time may grant share purchase
      warrants as part of its capital raising and conclusion of business
      transactions. The Company uses an 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | A compound financial instrument is a debt security with
      an embedded conversion option and requires the separate recognition of the
      liability and equity component. The fair value of the liability portion of
      the convertible bond was determined using a market interest rate for an
      equivalent debt instrument. This amount was recorded as a liability and
      the remainder of the proceeds was allocated to the conversion option and
      is recognized under contributed surplus.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(f) | Deferred income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Deferred income tax assets and liabilities are computed
      based on differences between the carrying amount of existing assets and
      liabilities on the statement of financial position 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. Deferred income tax assets also
      result from unused loss carry forwards and other deductions. Deferred tax
      assets are recognized to the extent that they are considered more likely
      than not to be realized.                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(g) | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(h) | Mine development and production start
  date                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Development of a project commence following the positive
      evaluation of the project feasibility and a conscious development decision
      by the Company. Various factors, including capital and production costs
      estimates, future metal prices as well as the extraction method of the
      minerals, might impact on the feasibility of a project during the
      development phase which are continuously evaluated and monitored as new
      information becomes available. The production start date is determined by
      evaluating the construction status of a project with specific reference to
      the availability of the major components required to commence with
      uninterrupted production of saleable metal. This decision is made prior to
      completion of the construction phase taking into account the various
      required technical performance levels of major asset components within the
project. Subsequent events following the predetermined production start date is
not taken into account.

28

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

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

Canadian public companies are required to prepare financial
statements in accordance with IFRS, as issued by the International Accounting
Standards Board for financial years beginning on January 1, 2011. On January 1,
2011, the Company adopted IFRS as the basis for preparing its consolidated
financial statements and the Companys audited financial statements for the
years ended December 31, 2011 and 2010 have therefore been prepared in
accordance with IFRS.

Refer note 2 and 29 of the annual financial statements for the
year ended December 31, 2011 for additional information on new accounting
policies and the impact of the IFRS conversion.

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

The IASB issued revised standards and amendments, which, unless
otherwise noted, are effective for annual periods beginning on or after January
1, 2013 with earlier application permitted. The Company has not yet assessed the
impact of these standards and amendments or determined whether it will early
adopt them.

Refer to note 2 of the annual financial statements for the year
ended December 31, 2011 for a detailed listing of revised standards and
amendments.

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

The Company disposed of its entire investment in Kryso
Resources Plc (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 reclassified unrealized fair value gains of $2.6
million (GBP1.7 million) and $1.1 million foreign exchange losses ($1.5 million
net) 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.

Hedging programs

(i) Zero cost collar program I

In connection with Term loan I (refer note 15 of the annual
financial statements for the year ended December 31, 2011), the Company executed
a ZCC hedge program for a total of 105,000 gold ounces over a period of three
years on August 13, 2010. Commencing January 2011, the Company was required to
deliver 1,250 gold ounces per month over a twelve month period. The remaining
90,000 would have been delivered in 24 equal monthly deliveries of 3,750 gold
ounces, starting January 1, 2012. The program included put options priced at
US$850 and call options priced at US$1,705 per Au eqv oz.

Up to December 9, 2011, 12,500 gold ounce positions expired
unexercised at no cost and the Company settled 2,500 gold ounces at a nominal
loss of $0.19 million.

The restructuring of Term loan I included the novation of the
outstanding positions as of December 9, 2011 into a revised ZCC hedge program
for a total of 165,474 gold ounces over a period of 5 years.

29

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

Marked-to-market movements until the novation on December 9,
2011 were calculated using an option pricing model with inputs based on the
following assumptions:

December 9
      2011
    December 31
      2010Gold price (per ounce) Risk free interest rate
      Expected life Gold price volatility
    US$1,710 0.27% - 0.66% 1  24 months
      19.93% - 32.52%
    US$1,419 0.25% - 1.34% 1  36 months
      17.3% - 27%


The fair value on inception, following novation and subsequent
marked-to-market movement until December 31, 2011, were calculated using an
option pricing model with inputs based on the following assumptions:

December 31
      2011
    December 9
      2011Gold price (per ounce) Risk free interest rate
      Expected life Gold price volatility
    US$1,564 0.33% - 1.285% 1  60 months
      20.35% - 32%
    US$1,710 0.27% - 1.30% 0.5  60.5
      months 19.93% - 33.5%


The pricing and delivery dates of the put and call options are
presented in (iii) below.

(ii) Zero cost collar program II

In connection with Term loan II (refer note 15 of the annual
financial statements for the year ended December 31, 2011), the Company executed
a ZCC hedge program for a total 117,500 gold ounces over a period of four years,
commencing in January 2012, on March 10, 2011.

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

December 31
      2011
    March 10
      2011Gold price (per ounce) Risk free interest rate
      Expected life Gold price volatility
    US$1,564 0.33% - 1.06% 1  48 months
      20.35% - 30.76%
    US$1,410 0.40% - 1.91% 10  57 months
      19.65% - 26.26%


The pricing and delivery dates of the put and call options are
presented in note (iii) below.

(iii) Gold delivery positions

The Companys gold delivery positions as at December 31, 2011
are as follows:

Put options

Strike
      price
    2012 AU oz
    2013 AU oz
    2014 AU oz
    2015 AU oz
    2016 AU oz
    Total AU ozZCC  1 ZCC  1 ZCC  1 ZCC  2
    $900 $950 $1,200 $1,050
    21,312 - - 10,500
    - 28,506 - 36,000
    - - 34,008 36,000
    - - 39,768 35,000
    - - 41,880 -
    21,312 28,506 115,656 117,50031,812
    64,506
    70,008
    74,768
    41,880
    282,974


30

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

Call options

Strike
      price
    2012 AU oz
    2013 AU oz
    2014 AU oz
    2015 AU oz
    2016 AU oz
    Total AU ozZCC  1 ZCC  1 ZCC  2
    $1,890 $1,930 $1,930
    10,656 10,656 10,500
    14,253 14,253 36,000
    17,004 17,004 36,000
    19,884 19,884 35,000
    20,940 20,940 -
    82,737 82,737 117,50031,812
    64,506
    70,008
    74,768
    41,880
    282,974


Refer to section 8 above for information relating to the fair
value of the financial guarantee and also note 27 of the financial statements
for a summary of the Companys 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 IFRS on
January 1, 2011. The adoption of IFRS principles has not had a material effect
on the manner in which the Company reports its accounts.

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, where possible, to minimize 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
impact of the conversion to IFRS is set out in note 29 to the consolidated
financial statements for the year ended December 31, 2011.

The conversion to IFRS has had a 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.

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

The following details the share capital structure as at March
30, 2012. These figures may be subject to minor accounting adjustments prior to
presentation in future consolidated financial statements.

31

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

Share Capital
      StructureEquity type
    Expiry date
    Exercise price
    Number granted
      (thousands)
    Total
      (thousands)Common shares
    
    
    
    542,431Share purchase options
    April 18, 2012 July 15,
      2012 October 9, 2012 February 10, 2013 March 26, 2013
      April 10, 2013 August 3, 2013 November 9, 2013 January 14,
      2014 February 11, 2014 March 11, 2014 April 12, 2014 July
      5, 2014 July 15, 2014 September 26, 2014 October 17, 2014
      November 21, 2014 January 23, 2015 March 26, 2015 March
      11, 2016 May 5, 2016
    $2.68 $1.49 $1.65
      $1.78 $1.74 $3.60 $1.81 $2.96 $1.35 $1.75
      $2.46 $1.49 $1.97 $1.49 $2.02 $1.64 $1.33
      $1.10 $1.74 $2.46 $2.36
    90 233 195 157
      1,680 110 313 340 625 690 3,991 2,130
      610 100 980 800 400 7,015 1,242 1,175
      400
    23,275Share purchase warrants
    March 30, 2014
    $0.90
    33,350
    33,350Convertible debentures
    November 30, 2014
    $2.15
    58,837
    58,837Fully diluted shares
    
    
    
    657,893


|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.

Working capital

Working capital includes cash and cash equivalents, trade and
other receivables, current inventories, trade payables and accrued liabilities
and is considered a non-GAAP measure.

Cash production cost

The Company reports cash cost of ounces sold and tonnes
produced. 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.

32

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS | 
| | ------------------------------------ | 
| |                                      | 
| | **YEAR ENDED DECEMBER 31, 2011**     | 

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

3 months endedDecember 31, 2011
    3 months endedDecember 31, 2010Nevada($000)
    South Africa($000)
    Nevada3($000)
    South Africa($000)Production cost relating to metal sold
      Net proceeds tax included in income tax expense Average inventory
      cost adjustment. Non-cash overhead costs included in production cost.
    14,285 285 - (396)
    14,345 - (981)4(420)
    23,580 278 -
      (1,853)
    - - - -Total cash production costs for theperiod
    14,174
    12,944
    22,005
    -Au eqv oz sold Ore tonnes processed
      Cash production cost per Au eqv oz Cash production cost per tonne
    27,603 24,328 $805
      $582
    7,058 163,848 $1,834
      $79
    31,911 39,087 $690
      $563
    - - - -


12 months endedDecember 31, 2011
    12 months endedDecember 31, 2010Nevada($000)
    South Africa($000)
    Nevada($000)
    South Africa($000)Production cost relating to metal sold
      Net proceeds tax included in income tax expense Average inventory
      cost adjustment. Less non-cash overhead costs included in production
      cost.
    60,827 2,105 -
      (1,466)
    40,716 - 756
      (1,430)
    46,267 1,216 -
      (964)
    - - - -Total cash production costs for theperiod
    61,466
    40,042
    46,519
    -Au eqv oz sold Ore tonnes processed
      Cash production cost per Au eqv oz Cash production cost per tonne
    92,239 98,068 $667
      $627
    21,989 563,9725$1,821 $71
    62,604 76,748 $743
      $606
    - - - -


_________________________3Nevada results for
the 3 and 12 months ended December 31, 2010 excludes production costs and sales
relating to third party milling agreements.

4An adjustment is made to eliminate the impact of
the opening stock pile on February 1, 2011 on the average cost in the fist year
of production build-up.

5Processed tonnes are adjusted to eliminate the
impact of the opening stock pile on February 1, 2011 on the cost per tonne
reported.

33

---

| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

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
      2011 ($000)
    December 31
      2010 ($000)
    December 31
      2011 ($000)
    December 31
      2010 ($000)Profit (loss) for the period Interest
      expense capitalized Impairment of loan due from related party
      (Profit) loss on derivative instruments Income tax recovery
    $37,642 - 13,680
      (6,155) (49,678)
    7,185 (5,931) -
      3,075 -
    (17,737) (2,515)
      13,680 30,096 (49,678)
    (27,141) (30,668) -
      9,958 -Adjusted (loss) profit for the
      period
    (4,511)
    4,329
    (26,154)
    (47,851)Weighted average number of common 
      shares
      outstanding (000)  
      Adjusted (loss)
      earnings per share
    475,709
      ($0.01)
    404,612
      $0.01
    459,099
      ($0.06)
    358,711
      ($0.13)


|15.4 | Reconciliation of Use of Proceeds from February 2011
      Offering
|---- | -------------------------------------------------------------------

In February 2011, the Company undertook an offering of $86.26
million (including a 15% over-allotment option) of common shares with net
proceeds after deducting Underwriters Fees and expenses of $81.4 million. The
following table sets out a comparison of how the Company used the proceeds
during the 10 month period following the closing date in February 2011, 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,
      2011** | 

Intended Use of Proceeds
      of February 2011 Offering CAD$
    Actual Use of
      Proceeds from February 2011 Offering and Explanation of
      Variance and impact on business objectives
    (Over)/under
      expenditureOffering Expenses
    $0.5 million
    Offering Expenses
    $0.5 million
    N/AUnderwriting Fee
    $3.75 million
    Underwriting Fee
    $3.75 million
    N/ABurnstone Mine Mine development
    $65 million
    Mine development
    $82.05 million
    ($17.05 million)Hollister Gold Project Exploration
    $5.8 million
    Exploration
    $ nil
    $5.8 millionGeneral working capital (over-allotment
      proceeds were not allocated)
    $11.25 million
    General working capital
      (over-allotment proceeds were not allocated)
    $ nil
    $11.25 millionTotal
    $86.3 million
    Total
    $86.3 million
    $ nilExplanation of variances and the impact of variances on
      the ability of the Company to achieve its business objectives and
      milestones
    The Graben fault (discussed above) detected in early 2011
      had a negative impact on the planned production build-up for the Burnstone
      Mine and planned cash flow to be generated from metal sales produced from
      the Burnstone Mine. All funds raised during the February 2011 public
      offering were subsequently directed towards funding the mine development
      and working capital for the Burnstone Mine with planned surface
      exploration at the Hollister Gold Project postponed until such time as the
      Burnstone mine generates positive cash flow.


|15.5 | 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, 2011. Based on this evaluation, our Chief Executive Officer and
the Chief Financial Officer have concluded that, as at December 31, 2011, 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.

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.

35

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| | MANAGEMENT'S DISCUSSION AND ANALYSIS   | 
| | -------------------------------------- | 
| |                                        | 
| | **YEAR ENDED DECEMBER 31,
      2011** | 

|15.6 | 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, 2011 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, 2011 to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements in accordance
with GAAP.

36

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